mtf^^i 


T 


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OF 

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OF  CALIFORNIA 

LOS  ANGELES 

SCHOOL  OF  LAW 


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Of  elementary  treatises  on  all  the  principal  subjects  of  the  law.     The 
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1.  Norton  on  Bills  and  Notes.      (2d  Edition. ) 

2.  Clark's   Criminal  Law. 

3.  Sh/pfnan's  Covwion-Laiv  Pleading.      (2d  Editio7i.) 

4.  Clark  ifn   Contracts. 

5.  Black^s  Constitutional  Lazv.      (2d  Edition.) 

6.  Fetter  on  Equity. 

7.  Clark  on   Criminal  Procedure. 

8.  Tiffatiy  on  Sales. 

9.  Glenti's  Internatioftal  Law. 

10.  Jaggard  on   Torts.      (2  vols.) 

11.  Black  on  Lnierpretation  of  Laws. 

12.  Haie  on  Baihnents  a?id  Carriers. 

13.  Sfnith's  Elemejitary  Law. 

14.  Hale  on  Damages. 

15.  Hopkins  on  Peal  Property. 

16.  Hale  on   Torts. 

17.  Tiffajiy  071  Persons  and  Domestic  Relations. 

18.  Croswell  on  Executors  'a?id  Administrators. 

19.  Clark  on   Corporatiojis. 
20  George  on  Parttiership. 

21.  Shipman  on  Equity  Pleading. 

22.  McKelvey  on  Evidence. 

23.  Fisher  on  Agency. 


To  follow :  Handbooks  of  the  Law  of  Code  Pleading, 
Federal  Procedure,  Private  Lnternatiofzal  Law,  Lnsurance, 
Persoftal  Property,  Wills,  Patents,  Extraordinary  Remedies, 
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(Jpu6ii0^e^  (xxiii  for  safe  6^ 

nreet  gpuBfie^mg  Co.,  ^t  Qpauf,  (gtinn. 

A9?<87 


HAND-BOOK 


LAW  OF  BILLS  AND  NOTES 


By  CHARLES  P.  NORTON 

Ml 

Lecturer  on  Bills  and  Notes  in  the  Buffalo  Law  School 


SECOND  EDITION 

WITH  AN  ADDITIONAL  CHAPTER  ON  CHECKS 

By  WM.  L.  CLARK,  Jr. 


St.  Paul,  Minn. 

WEST  PUBLISHING  CO. 

1896 


Copyright,  1898, 

BY 

WEST  PUBLISHING  COMPANY. 


Copyright,  1895, 

BY 

WEST  PUBLISHING  COMPANY. 


T 
1896 


To 

ADELBERT  MOOT, 

In  recognition  of  Ms  care  and  devotion 

to  the  interests  of 

The  Buffalo  Law  School^ 

this  booli  is  inscribed. 

(lU)' 


671448 


TABLE   OF   CONTENTS. 


CHAPTER  I. 

OF  NEGOTIABILITY  SO  FAR  AS  IT  RELATES  TO  BILLS  AND  NOTES. 

Section  Page 

1.    Origin   of   Negotiability 1-S 

2-7.    Distinction  between  Assignability  and  Negotiability 8-13 

8-9.    Indicia   of  Negotiability 13-10 

10.  Purpose   of   Negotiability 16-18 

11.  Payment  by  Negotiable  Instrnmeut 18-23 

CHAPTER  II. 

OF    NEGOTIABLE    BILLS  AND   NOTES,   AND   THEIR    FORMAL   AND 
ESSENTIAL  REQUISITES. 

12.  Definition  and  Forms  of  Bills  of  Exchange 2'lr-27 

13.  Definition  and  Form  of  Note 27-28 

14.  Essentials  of  BiU  or  Note 28 

15.  Order  Contained  in  Bill 28-32 

16.  Promise  Contained  in  Note 32-34 

17-22.    Certainty  as  to  the  Terms  of  the  Order  or  Promise 84-f8 

23-26.    Payment  of  Money  Only 49-56 

27-31.    Specification  of  Parties 57-66 

32-34.    Capacity   of  Parties 66-69 

35-37.    Delivery  of  Instruments 69-74 

38.  Date    74-76 

39.  Value    Received 76-77 

40.  Days  of  Grace 77-79 

CHAPTER  III. 

ACCEPTANCE  OF  BILLS  OF  EXCHANGE. 

4L    Definition    80-83 

42^5.    Acceptance  According  to  Tenor 83-S7 

46.    Who   may   Accept 87-89 

NEG.  BILLS  (v) 


VI  CONTENTS. 

Section  Pago 

47.    Delivery    89-91 

48-49.    Forms  and  Varieties  of  Acceptance 91-9.5 

50.          Implied    Acceptance 95-90 

51-52.          Acceptance  on  Separate  Paper 9G-100 

53.    Parol  Acceptance  of  a  Bill 10O-r02 

64-55.    Acceptance  for  Honor  or  Supra  Protest 102-104 

CHAPTER  rV. 

INDORSEMENT. 

56.  Definition    105 

57.  Formal    Requisites 105-110 

58-59.    Indorsement   in   Blank 110-114 

GO-61.    Indorsement   in   Full 114-117 

G2-64.    Indorsement  without  Recourse,  Conditional  and  Restrictive 

Indorsement    117-125 

G5.    Nature  of   Indorsement 125-r28 

G6.    Requisites  of  Indorsement 128-135 

67-C8.    Anomalous    Indorsements 135-140 


CHAPTER  V. 


OF  THE  NATURE  OF  THE  LIABILITIES  OF  THE  PARTIES. 

69.  Acceptor  and    Maljer 141-142 

70.  Facts  Which  the  Acceptor  is  Estopped  to  Deny 142-147 

71.  Facts  Which  the  Acceptor  does  not  Admit 147-149 

72-73.    Acceptor  Supra   Protest 149-153 

74-76.    Drawer  and   Indorser 153-156 

77.  Warranties   or   Facts   Which   the   Drawer   is   Estopped  to 

Deny     156-159 

78.  Warranties  or  Facts  Which  the  Indorser  is  Estopped   to 

Deny    159-lGG 

79.  Indorser  without  Recourse 166-167 

80.  Damages   against  the   Acceptor,  Maimer,    Drawer,   and    In- 

dorsers  upon  the  Bill  and  upon  the  Warranties 1G7-173 

81-83.    Accommodation  Parties  and  Persons  Accommodated 173-179 


CONTENTS. 


vu 


CHAPTER  VI. 

TRANSFER. 

BwrtloB  PaP^e 

84.  Definition    180-181 

85.  Validity  between  Immediate  Parties 181-188 

86.  Methods  of  Transfer 188 

87.  By    Assignment 189-191 

88.  By  Operation  of  Law 191-192 

89-90.  By    Indorsement 193-197 

91.  By    Delivery 197-199 

92.  Overdue    Paper 199-205 


CHAPTER    VII. 

DEFENSES  COMMONLY  INTERPOSED  AGAINST  A  PURCHASER  FOR 
VALUE    WITHOUT    NOTICE. 

93.    Real  and  Personal  Defenses 206-208 

M-108.  Real    Defenses 20&-245 

109-121.  Personal    Defenses 245-291 


CHAPTER  VIII. 

PURCHASER  FOR  VALUE  WITHOUT  NOTICE. 

122.    What    Constitutes 292-293 

123-124.    Value    •  293-299 

125-127.    Notice    300-309 

12a-131.    Presumption  and  Burden  of  Proof— Order  of  Proof 310-319 


CHAPTER  IX. 

PRESENTMENT  AND  NOTICE  OF  DISHONOR. 

132.    In    General 320-321 

133-140.    Presentment    321-341 

141-144,  By  Whom  and  to  Whom  Made— Effect    of    Failure  to 

Present  and  Protest 341-352 

145-146.    Notice  of  Dishonor 3r)2-371 

147.    Excuses  for  Failure  to  Present  or  to  Give  Notice 371-379 


VUl 


CONTENTS. 


CHAPTER   X. 

ciii;cKs. 

Soct'on  Pa)?o 

148-150.    In    Gencrnl 380-3S? 

151.    Checks  as  Negotiable  Inslriimeuts 384-388 

152-154.    Presentment  and  Notice  of  Dislionor— Effect  of  Delay 388-393 

155.    Rights  of  Holder  agaiust  Bank 394-395 

15G-159.    Certitication  and  Acceptance  of  Checks 395-403 

ICO.    Failure  of  Bank  to  Honor  a  Check 403HM)5 


+ 


HAND-BOOK 


OF 


NEGOTIABLE  BILLS  AND  NOTES 


CHAPTER  I. 

OF  NEGOTIABILITY  SO  FAR  AS  IT  RELATES  TO  BILLS  AND  NOTES. 

1.  Origin  of  Negotiability. 

2-7.  Distinction  between  Assignability  and  Negotiability. 

8-9.  Indicia  of  Negotiability. 

10.  Purpose   of  Negotiability. 

11.  Payment  by  Negotiable  Instrument. 

ORIGIN  OF  NEGOTIABILITY. 

1.  The  negotiability  of  bills  of  exchange  originates  in  the 
custom  of  merchants.  The  statute  of  Anne,  "w^hich  is  de- 
claratory of  the  common  law,  established  the  negotiability 
of  promissory  notes. 

The  law,  looking  at  bills  of  exchange  and  promissory  notes  as  a 
circulating  medium,  divides  them  into  two  classes — negotiable  in- 
struments and  non-negotiable  insti'uments.  Negotiability  is  not 
necessary  to  the  form  or  substance  of  a  promissory  note  or  bill 
of  exchange.^  The  non-negotiable  instrument  is  a  mere  evidence  of 
an  indebtedness,  and  an  ordinary  contract.     In  its  transfer,  the  law 

»  Michigan  Ins.  Bank  v.  Eldred,  9  Wall.  544;    Wells  v.  Brigham,  6  Gust. 
6;    Downing  v.  Backenstoes,  3  Caines,  137;   President,  etc.  of  Turnpike  Road 
V.  Hurtin,   9  Johns.   217;    Kimball,  v.  Huntington,  10  Wend.  675;    Hall   v. 
Farmer,  5  Denio,  484. 
NEG.  BILLS 1 


2         m:goti.\bility  so  far  as  it  relates  to  bills  and  notes.     [Ch.  1 

treats  it  in  most  respects  as  an  ordinary  chose  in  action,  and  sub- 
ject to  the  general  rules  touching  assignments.  For  the  negotia- 
ble instrument,  on  the  other  hand,  in  its  most  common  form  of  the 
bill  and  note,  it  has  endeavored  to  construct  a  sj'stem  of  rules,  which 
shall  protect  persons  who  take  it  as  a  circulating  medium,  and  which 
it  is  the  purpose  of  this  treatise  to  point  out.  This  we  shall  term 
''negotiability."  * 
Custom  of  Merchants — Law  Merchant. 

Bills  and  notes  are  to-day  alike  invested  with  the  privileges  of 
negotiability,  but  they  derive  it  from  a  different  origin.  The  his- 
torical source  of  the  negotiability  which  invests  bills  is  the  custom 
of  merchants.  Notes  were  at  first  within  the  custom  of  merchants, 
then  excluded  from  it.  Their  negotiability  was  however  established 
by  the  statute  of  3  <&  4  Anne,  c.  9,  §§  1-3. 

The  custom  of  merchants  means  a  code  of  rules  growing  out  of 
the  needs  of  and  relating  to  trade,  which  the  courts  administered 
as  law  distinct  from  the  ordinary  common  law  of  England.  In 
English  law  it  is  as  old  as  the  Magna  Charta.  It  is  recognized 
in  the  statutes  of  the  Plantagenets  and  the  Tudors.^  In  its  origin 
it  distinguished  the  contracts  of  foreign  merchants  from  the  con- 
tracts of  ordinary  indi\iduals,  construing  them  not  according  to  the 
tenets  of  the  common  law,  but  according  to  the  usages  of  trade.* 
This  custom  of  regulating  dealings  between  native  and  foreign  mer- 
chants was  extended  to  dealings  between  native  merchants,  but  waa 
confined  to  the  persons  of  merchants,  as  apart  from  those  pursuing 
other  vocations."^  And  it  was  not  until  1666  that  courts  declared 
that  "the  law  of  merchants  is  the  law  of  the  land,  and  the  custom 
is  good  enough  generally  for  any  man,  without  naming  him  mer- 
chant." "     Of  the  many  customs  of  merchants,  there  were  two  which 

2  For  a  discussion  of  the  origin,  history,  and  purpose  of  negotiable  instru- 
ments, see  Goodwin  v.  Robarts,  L.  R.  10  Exch.  337,  Johns.  Cas.  Bills  &  N.  3. 

8  Magna  Charta,  c.  30;  Acton  Buvnel  de  Mercatoribus,  11  Edw.  I;  the 
Statute  of  Merchants,  13  Edw.  I,  See,  also,  27  Edw.  III.  cc.  19,  20.  See, 
also,  13  Edw.  VI.  c.  10,  34  Hen.  VIII.,  cited  in  Brown,  Abr.  tit.  "Customs," 
p.  59, 

*  Co.  Litt.  182;  2  Inst.  404;   Vanheath  v.  Turner,  (Mich.  Term,)  Winch,  24. 

0  Eaglechilde's  Case,  Het.  167;    Litt.  3G3. 

8  Woodward  v.  Rowe,  2  Keb.  105,  132:  See,  also,  Anon.,  Hardr.  485  Mich. 
Term,  20  Car.  II.  (18G8)  believed  to  be  Milton's  Case,  vide  1  Mod.  280;    Carter 


Ch.  1]  ORIGIN    OF    NEGOTIABILITY.  3 

were  especially  the  subject  of  judicial  interpretation.  They  were 
those  concerning  instruments  which  related  to  the  remittance  of 
money  from  one  place  to  another,  and  in  which  credit  was  used  as 
a  means  of  liquidating  indebtedness,  instruments,  in  short,  which 
are  now  called  the  "bill  of  exchange"  and  the  "promissory  note." 
Of  these,  bills,  and  particularly  foreign  bills,  are  by  far  the  most 
ancient.  Anderson,  in  his  History  of  Commerce,^  speaJis  of  one 
granted  by  the  Emperor  Barbarossa  to  the  city  of  Hamburg  in  the 
year  1189.  "I  remember,"  said  Chief  Justice  Holt,*  "when  actions 
upon  inland  bills  of  exchange  did  first  begin;  and  there  they  laid 
a  particular  custom  between  London  and  Bristol,  and  it  was  an 
action  against  the  acceptor.  The  defendant's  counsel  would  put 
them  to  prove  the  custom,  at  which  Hale,  C.  J.,  who  tried  it,  laughed, 
and  said  they  had  a  hopeful  case  of  it.  And  in  my  Lord  North's 
time  it  was  said  that  the  custom  in  that  case  was  part  of  the  com- 
mon law  of  England,  and  these  actions  since  became  frequent,  as 
the  trade  of  the  nation  did  increase,  and  all  the  difference  between 
foreign  bills  and  inland  bills  is  that  foreign  bills  must  be  protested 
before  a  public  notary  before  the  drawer  can  be  charged,  but  inland 
bills  need  no  protest."  Between  inland  bills  and  promissory  notes 
at  first  there  was  no  distinction.  Both  were  called  indifferently 
bills  of  exchange.^  The  law  considered  a  promissory  note  in  the 
light  of  a  bill  of  exchange  drawn  by  a  man  upon  himself,  and  ac- 
cepted at  the  time  of  drawing.^  And  it  is  worthy  of  remark  that 
the  statement  accepted  by  the  text  writers,  and  repeated  again  and 
again  in  the  cases,  that  a  promissory  note  was  never  within  the  cus- 
tom of  merchants,  is  incorrect.^''  It  was  as  much  a  mercantile  in- 
strument as  a  bill  of  exchange.  It  was  introduced  under  the  cus- 
tom of  merchants,  and  it  was  therefore,  up  to  the  time  of  the  famous 

V.  Downish  (1  W.  &  M.,  anno  IGSS)  Show.  127.  See,  also,  complete  review 
of  the  cases  on  this  subject,  Dunlop  v.  Silver,  1  Cranch,  367. 

1 1  And,  Com.  p.  171. 

♦  Buller  V.  Crips,  6  Mod.  29. 

8  Grant  v.  Vaughan,  3  Burrows,  1525,  1  W.  Bl,  488;  Edgar  v.  Chut,  1 
Keb.  592,  G3G;  Horton  v.  Coggs  (Mich.  Term,  2  W.  &  M.  6,  anno  1GS3),  3  Lev. 
299. 

9  Marius,  in  his  Advice,  p.  3;   Lov.  Bills  &  N.,  p.  22;    Kyd,  Bills,  p.  2. 

10  Hill  V.  Lewis,  1  Salk.  132;  Williams  v.  Williams  (viz.  Pasch.  Term,  5 
W.  &  M.,  anno  1G1)2)  Carth.  2G9;    Bromwich  v.  Lloyd,  2  Lutw.  503. 


4  NEGOTIABILITY  SO  FAR  AS  IT  RELATES  TO  BILLS  AND  NOTES.        [Cll.    I 

dispute  between  Lord  Holt  and  the  merchants  wliich  led  to  the 
enactment  of  the  statute  of  Anno,  a  nojjcotiable  instrument.  "The 
reason  of  making  the  statute  of  Anne,"  says  Lord  Hardwicke,'* 
"arose  from  some  determinations  in  the  beginning  of  her  reign  by 
Holt,  Chief  Justice,  that  no  action  cpuld  be  maintained  on  a  prom- 
issory note  nor  declaration  thereupon."  ^^  In  these  decisions  Lord 
Holt  denounced  promissory  notes  as  a  "new  sort  of  specialty,  un- 
known to  the  common  law,  and  invented  in  Lombard  street."  He 
declared  that  "to  allow  such  a  note  to  carry  any  lien  with  it  were  ta 
turn  a  piece  of  paper,  wliich  is  in  law  but  evidence  of  a  parol  con- 
tract, into  a  specialty."  And,  in  defiance  of  established  rules, 
Lord  Holt  refused  to  allow  to  promissory  notes  the  privilege  of  ne- 
gotiability. 

Text  of  Statute  of  Anne. 

At  this  juncture,  in  confirmation  of  the  ancient  rule,  and  to  meet 
the  rule  established  by  Lord  Holt,  the  statute  of  Anne  was  enacted. 
It  is  so  important,  and  so  often  referred  to  hereafter,  that  space 
is  given  to  it.  Its  most  important  provisions  are  as  follows: 
"Whereas,  it  hath  been  held  that  notes  in  writing,  signed  by  the 
party  who  makes  the  same,  whereby  such  party  promises  to  pay 
unto  any  other  person,  or  his  order,  any  sum  therein  mentioned,  are 
not  assignable  or  indorsable  over,  within  the  custom  of  merchants, 
to  any  other  person ;  and  that  the  person  to  whom  the  sum  of  money 
mentioned  in  such  note  is  payable  cannot  maintain  an  action  by  the 
custom  of  merchants,  against  the  person  who  first  made  and  signed 
the  same;  and  that  any  person  to  whom  such  note  shall  be  assigned, 
indorsed,  or  made  payable  could  not,  within  the  said  custom  of 
merchants,  maintain  any  action  upon  such  note  against  the  person 
who  first  drew  and  signed  the  same:  Therefore,  to  the  intent  to  en- 
courage trade  and  commerce,  which  will  be  much  advanced  if  such 
notes  shall  have  the  same  effect  as  inland  bills  of  exchange,  and  shall 
be  negotiated  in  like  manner,  be  it  enacted,  that  all  notes  in  writ- 
ing whereby  any  person  shall  promise  to  pay  to  any  other  person, 
his  order  or  unto  bearer  any  sum  of  money  mentioned  in  the  note 

11  Walmsley  v.  Child  (anno  1749)  1  Ves.  Sr.  34G. 

12  Clerk  V.  :Martin,  1  Salk.  129,  2  Ld.  Kaymoud.  757;  Potter  v.  Pearson,  2: 
Ld.  Ka3m.  739. 


Ch.    1]  ORIGIN    OF    NEGOTIABILITY.  5 

shall  be  taken  and  construed  to  be  payable  to  any  such,  person  to 
whom  the  same  shall  be  payable;  and  also  every  such  note  shall 
be  assignable  or  indorsable  over  in  the  same  manner  as  inland  bills 
of  exchange  are  according  to  the  custom  of  merchants;  and  that  the 
person  to  whom  such  sum  of  money  is  payable  may  maintain  an  ac- 
tion for  the  same  as  he  might  do  upon  an  inland  bill  of  exchange 
made,  or  drawn,  according  to  the  custom  of  merchants;  and  that  any 
person  to  whom  such  note  is  indorsed,  or  assigned,  or  the  money 
therein  mentioned  ordered  to  be  paid  by  indorsement  thereon,  may 
maintain  his  action  for  such  sum  of  money  either  against  the  person 
who  signed  the  note,  or  against  any  of  the  persons  that  indorsed  the 
same,  in  like  manner  as  in  cases  of  inland  bills  of  exchange."  Thus 
by  the  statute  of  Anne  the  negotiability  of  notes  was  established. 
Its  principles  have  been  followed  and  generally  embodied  in  the  stat- 
utes of  the  various  states  of  the  Union.  And  in  the  many  cases 
which  arise  with  reference  to  the  negotiability  of  instruments  in 
forms  of  note^  the  point  is  to  determine  whether  they  were  such 
as  were  within  the  purview  of  the  statute  of  Anne,  or  of  the  statutes 
of  the  various  states  which  have  embodied  the  principles  of  the  stat- 
ute of  Anne. 

(Construction  of  Statute  of  Anne. 

The  statute  of  Anne,  at  the  hands  of  the  courts,  has  been  con- 
strued with  great  latitude,  a  latitude  in  fact  which  renders  some- 
what inconsistent  and  irreconcilable  the  theories  of  negotiable  and 
non-negotiable  instruments.  The  English  courts  after  its  enactment 
looked  upon  it  as  a  remedial  statute,  as  it  undoubtedly  was.  But 
by  a  line  of  cases  which  seem  to  go  beyond  the  utmost  limits  of  its 
evident  intendment,  the  courts  also  declared  that  non-negotiable 
notes  came  within  the  statute's  provisions.^ ^  A  payee,  they  decided, 
could  maintain  an  action  within  the  statute  against  the  maker,  by 
which  was  meant  only  that  the  payee  could  declare  upon  the  note, 
under  the  statute,  instead  of  declaring  upon  the  consideration  or 
transaction  which  led  to  its  being  given.  This  interpretation,  which 
in  its  inception  was  possibly  an  adaptation  of  an  artificial  system 
•of  pleading  to  business  needs,  has  resulted  in  confusion.     In  New 

13  Kyd,  Exch.  (1790)  G5;  Smith  v.  Kendall,  6  Term  li.  123;  1  Esp.  N.  P. 
231;   Burchell  v.  Slocock,  2  Ld.  Raym.  1545. 


6  NEGOTIABILITY  SO  FAR  AS  IT  RELATES  TO  BILLS  AND  NOTES.       [Ch.    1 

York,'*  for  instance,  it  seems  to  be  the  view  of  the  courts  that  non- 
negotiable  notes  differ  from  negotiable  ones  only  in  two  main  par- 
ticulars. One  is  that  the  indorser  is  regarded  as  a  maker  or  guar- 
antor, and  not  as  a  simple  indorser;  the  other  that  the  equities 
between  the  parties  are  not  a  subject  of  set-off  when  the  instrument 
is  transferred  to  a  bona  fide  purchaser  for  value  before  maturity. 
Tlierefore  in  Xew  York  the  general  rule  of  contracts,  that  there 
cannot  be  a  recovery  upon  them  without  proof  of  consideration,  does 
not  obtain  with  non-negotiable  instruments,  and  the  non-negotiable 
promise  to  pay  money  is  itself  presumption  of  a  consideration.^'  So, 
too,  in  Massachusetts,  where,  although  the  statute  of  Anne  has 
never  been  enacted,  its  doctrines  are  regarded  as  declaratory  of  the 
common  law,^®  the  early  English  rule  is  followed.^ ^  The  courts  of 
Connecticut,  however,  have  adopted  a  different  rule.^®  With  them, 
where  the  note  is  not  negotiable,  it  is  a  mere  contract  between  the 
original  parties,  not  intended  for  transfer,  and  a  consideration  must 
be  shown.  This  is  more  consistent  with  the  originfll  intention  of 
the  statute.  For  one  of  the  most  marked  distinctions  between  the 
custom  of  merchants  and  the  rules  of  common  law  was  in  refer- 
ence to  the  assignment  of  contract  rights.  The  custom  of  mer- 
chants aimed  to  shut  out  equities  from  following  transfer.  Accord- 
ing to  that  custom,  want  of  consideration  was  no  defense  to  an 
instrument  in  the  hands  of  a  bona  fide  holder,  and  hence,  by  way 
of  corollary,  came  the  doctrine  that  an  expression  of  consideration 
in  the  instrument  itself  was  wholly  unnecessary.  But  this  was  con- 
fined to  negotiable  instruments.  It  did  not  include  non-negotiable 
ones. 

"Maule  V.  Crawford,  14  Hun,  193;  Lee  v.  Swift,  1  Denio,  r>G5;  Barrick 
V.  Austin,  21  Barb.  241. 

IB  President,  etc.,  of  Turnpike  Road  v.  Hurtin,  9  Johns.  217;  Kimball  v. 
Huntington,  10  Wend.  675;  Paine  v.  Noelke,  53  How.  Prae.  273;  3  Kent, 
Comm.  77;    Camwright  v.  Gray,  127  N.  Y.  92,  27  N.  E.  385. 

16  Richards  v.  Barlow,  140  Mass.  21S,  G  N.  E.  68. 

17  Townsend  v.  Derby,  3  Mete.  (Mass.)  303;  Dean  v.  Carruth,  108  Mass. 
242.  But  in  Massachusetts,  in  case  of  disputed  consideration,  the  burden  of 
proof  is  on  the  plaintiff.  Perley  v.  Perley,  144  Mass.  104,  10  N.  E.  726^ 
Simpson  v.  Davis,  119  Mass.  269. 

isEdgerton  v.  Edgerton,  8  Conn.  6;  Bristol  v.  Warner,  19  Conn.  7;  Dan- 
iels, Xeg.  Inst  §  1C2;  Pars.  Bills  &  N.  p.  227. 


Ch.    1]  ORIGIN    OF    NEGOTIABILITY.  7 

Non-negotiable  Bills  and  Notes. 

This  anomalous  doctrine  of  presumptive  consideration  seems  not 
to  be  extended  to  inland  bills  of  exchange.  With  them,  it  is  nec- 
essary to  aver  and  prove  a  consideration.^®  Non-negotiable  bills 
are,  in  general,  mere  assignments  or  orders.  A  number  of  im- 
portant distinctions  between  them  and  negotiable  bills  are  to  be 
pointed  out:  A  person  suing  the  acceptop  must  show  funds  in 
the  acceptor's  hands  to  pay,^°  for  the  agreement  is  not  an  ac- 
ceptance, but  a  mere  promise  to  pay,  and  must  be  based  upon  a 
suificient  consideration.^^  The  acceptor  cannot  be  sued  upon  the 
bill,  but  upon  the  promise  to  pay  evidenced  by  the  acceptance.  The 
acceptor  is  under  no  general  liability  to  pay  the  bill  in  the  first  in- 
stance. Non-negotiable  bills  are  assignments  in  the  sense  that  they 
are  directions  to  appropriate  and  hold  the  property  specified  in  them 
to  the  use  of  a  third  person.  The  third  person  has  them  thus  as- 
signed to  him,  and  this  whether  they  consist  of  the  whole  or  part 
of  the  fund,  and  whether  assented  to  or  not  by  the  drawee,  as  long 
as  the  drawee  had  notice  of  it.^^  They  are  treated  as  moneys  or 
property  held  by  the  drawee  for  another.^' 

There  are  some  features  which  non-negotiable  bills  and  non-nego- 
tiable notes  also  have  in  common.  When  transferred,  it  is  by  opera- 
tion of  the  theory  of  assignment,  and  not  of  indorsement,^*  and  the 
fact  of  possession  of  either  the  bill  or  note  is  not  evidence  of  such  ti- 
tle that  its  mere  production  upon  a  trial  is  prima  facie  evidence 
of  a  right  to  recover.  And,  lastly,  title  to  either  a  non-negotiable 
bill  or  note  is  subject  to  every  equity.  Under  the  strict  common 
law  rule  the  indorsee  of  a  bill  or  note,  in  its  terms  not  negotiable, 
may  sue  his  immediate  indorser  in  his  own  name,  but  he  can  only 

19  Raiibitschek  v.  Blank,  80  N.  Y.  479;  Averett  v.  Booker,  15  Grat.  1G3; 
Wells  V.  Brigham,  6  Cush.  6. 

20  Munger  v.  Shannon,  61  N.  Y.  251. 

21  Atkinson  v.  Manks,  1  Cow.  691. 

2  2  Morton  v.  Naylor,  1  Hill,  583;  Mandevllle  v.  Welch,  5  Wheat.  277;  Row 
V.  Dawson,  1  Ves.  Sr.  331;  Lett  v.  Morris,  4  Sim.  607;  Brill  v.  Tuttle,  81  N. 
Y.  457;  Ehi-ichs  v.  De  Mill,  75  N.  Y.  370;  Bobbins  v.  Bacon,  3  Greenl.  346; 
Bank  of  Commerce  v.  Bogy,  44  Mo.  18. 

23  Lowei-y  v.  Steward,  25  N.  Y.  239,  243. 

24  An  assignment,  as  appliGd  to  bills  and  notes,  is  the  transfer,  by  writing, 
of  an  interest  therein.    Franklin  v.  Twogood,  IS  Iowa,  515. 


8  NEGOTIABILITY  SO  FAR  AS  IT  RELATES  TO  BILLS  AND  NOTKS.        [Cll.    1 

sue  the  maker  or  remote  indorser  in  the  name  of  the  original  payee, 
except  where  special  statute  otherwise  provides.  The  indorser  of 
paper  not  negotiable  is  only  responsible  to  parties  not  immediate 
M  here  he  especially  contracts  to  be  so,  being  treated  as  guarantor 
or  maker.  And,  lastly,  an  indorser  of  either  cannot  insist  on  de- 
mand and  notice  as  a  condition  precedent^" 

DISTINCTION    BETWEEN  ASSIGNABILITY  AND  NEGOTIA- 
BILITY. 

2.  Assignability  pertains   to   contracts  in  general. 

3.  An  assignment  is  the  legal  method  of  transferring 
the  property  or  rights  evidenced  by  the  contract. 

4.  It  is  an  impracticable  method,  as  regards  a  circulat- 
ing medium,  because: 

(a)  Title   in  third  parties   created    by   assignment,    as 

against  the   debtor,  is  not  complete  "without  no- 
tice to  the  debtor. 

(b)  No  subsequent  purchaser  of  the  property  or  right 

can  acquire  better  title   than  that  of  his  imme- 
diate assignor. 

5.  Negotiability  pertains  to  a  special  class  of  contracts. 

6-7.  Negotiability  facilitates  their  transfer  as  a  circulat- 
ing medium,  because: 

(a)  The   bona   fide   possessor  for  value  is  presumed  to 

be  the  true  owner,  and  has  good  title. 

(b)  Transfer  is  effected  by  indorsement  or  delivery. 

(c)  In  general,  a  consideration  for  the  contractual  re- 

lation is  conclusively  presumed  as  betw^een  par- 
ties not  immediate. 

We  purpose  here  to  state  briefly  the  fundamental  reasons  why 
negotiable  bills  and  notes  could  not  readily  be  transferred  as  a 

*8  Richards  v.  Warring,  4  Abb.  Dec.  50;  McMullen  v.  Rafferty,  89  N.  Y. 
456;  Cromwell  v.  Hewitt,  40  N.  Y.  401;  Story  v.  Lamb,  52  Mich.  525,  IS  ". 
W.  248;    SUiun  v.  Fredericks,  50  IlL  439;    Rabberman  v.  Muelilliauseu,  3  111. 

ApiJ.  o2G. 


Ch.   1]       DISTINCTION    BETWEEN    ASSIGNABILITY    AND    NEGOTIABILITY.  9 

circulating  medium  under  the  rules  governing  the  transfer  of 
ordinary  choses  in  action.  The  riglits  evidenced  or  created  by 
ordinary  contractual  obligations  are  almost  always  a  kind  of 
property,  ha\ing  in  themselves  a  value  measured  in  law  by  the  dam 
ages  assessable  upon  their  breach.  This  property  may  at  this  stage 
of  the  law  pass  from  person  to  person  just  as  any  other  property 
does.  But  there  are  well-settled  rules  governing  such  transfer,  which 
are  the  outgrowth  and  mingling  of  early  doctrines  of  the  courts  of 
common  law^  and  of  equity,  and  at  which  the  student  must  glance 
to  understand  the  rules  themselves.  To  this  must  also  be  added 
thy  statement  that  statutes,  from  time  to  time,  have  been  largely 
instrumental  in  moulding  these  doctrines  of  common  law  and  of 
equUy  into  the  form  which  the  theory  of  assignment  of  choses  in 
action  presents  at  the  present  time. 

Assigrment. 

It  ^^as  probably  the  common-law  rule  in  the  first  instance  that  no 
assignee  of  the  benefits  of  a  contract  could  sue  for  and  recover  them. 
The  primitive  view  was,  in  the  first  place,  that  the  contract  created 
a  strictly  personal  obligation  between  the  creditor  and  the  debtor, 
and  also  tliat  the  assignment  of  choses  in  action  would  increase  lit- 
igation— a  reason  which  led  the  courts  to  set  their  faces  resolutely 
against  it.^*'  And  whether  from  reasons  of  business  expediency,  or 
because  they  were  infiuenced  by  equitable  doctrines,  is  not  clear, 
but  the  courts  of  common  law  at  an  early  day  modified  this  rule 
into  one  that  tor  a  long  time  prevailed,  namely,  that  an  assignment 
of  a  contract  m^ight  be  made,  but  the  assignee  must  sue  for  its  ben- 
efit in  the  name  of  the  assignor  or  his  representatives.  The  theory 
was  that  the  courts  of  common  law  would  so  far  take  cognizance  of 
equitable  rights  cieatod  by  the  assignment  that  the  name  of  the 
assignor  miglit  be  lised  as  a  trustee  of  the  benefits  of  the  contract 
for  the  benefit  of  the  assignoe.^^  This  doctrine  has  been  generally 
modified  by  statutes,  1?,ie  commonest  ones,  in  the  United  States,  be- 
ing the  provisions  of  tl>e  various  Codes, — that  "every  action  must 
be  prosecuted  by  the  real  party  in  interest,"  and  that  the  "transfer 

28  Pol.  Cont.  207;   Beecher  v.  Buckingham,  18  Conn.  110. 
2  7  Caister  v.  Eccles,  1  Ld.  Raym.  6S3;    McWilliam  v.  Webb,  32  Iowa,  577; 
Halloran  v,  Wliitcomb,  43  Vt  30t;   Fay  v.  Guynon,  131  Mass.  31. 


10         NEGOTIABILITY  SO  FAR  AS  IT  RELATES  TO  BILLS  AND  NOTES.        [Ch.    1 

of  every  claim  or  demand  passes  an  interest  which  the  transferee 
may  enforce  by  an  action  in  his  own  name,  as  the  transferrer  might 
have  done."  With  courts  of  equity,  it  is  true,  the  rule  was  dif- 
ferent. For  in  equity,  from  immemorial  times,  the  assignment  of 
a  chose  in  action  or  of  the  benefits  under  a  contract  has  been  per- 
mitted, and  the  assignee  could  maintain  a  rfuit  in  equity  in  his  own 
name.^^  But,  however  salutary  the  operation  of  this  ecjuitable  rule 
might  have  been  in  some  phases  of  the  enforcement  of  contract 
rights,  it  could  have  had  little  influence  with  bills  and  notes.  Cases 
arising  upon  them  came  within  the  cognizance  of  the  courts  of  com- 
mon law.  And  there  are  cases  to  show  that  even  when  the  as- 
signed non-negotiable  promise  was  to  pay  a  sum  of  money  to  the 
promisee,  or  to  bearer,  or  to  order,  or  where,  by  any  other  fcrm 
of  words,  the  instrument  purported  to  be  made  assignable,  even 
then  the  holder  could  not  sue  in  his  own  name,  but  only  in  that 
of  his  assignor.^®  This  objection,  inasmuch  as  it  related  orly  to 
the  form  of  action,  was  not  of  importance.  But  were  it  the  ruie 
governing  the  transfer  of  negotiable  instruments,  it  would  certainly 
clog  their  circulation,  since  it  would  complicate  and  render  less  cer- 
tain the  recovery  of  judgments  upon  them. 

There  were  other  rules  relating  to  the  transfer  of  ordinary  con- 
tracts, governing  alike  courts  of  common  law  and  equity,  which 
were  of  greater  practical  importance.  The  first  is  the  doctrine  of 
notice.  The  rule  governing  assignment,  as  stated  in  the  principal 
text,  is  that  title  in  third  parties,  as  against  the  debtor,  is  not  com- 
plete without  notice  to  him.  Naturally,  as  the  resdt  of  this  rule, 
follows  the  one  that  a  debtor  who  performs  his  contract  to  the  orig- 
inal creditor,  without  notice  of  any  assignment  by  the  creditor 
to  another  person,  is  released  from  his  obligation  under  it.^°  An 
illustration  of  this  principle  is  a  well-known  cast  where  a  bond  and 
mortgage  had  been  given,  and  assigned  by  var'ous  intermediate  as- 

28  Smith  V.  Brittain,  3  Ired.  Eq.  347;  Tibbets  v.  Jerrish,  25  N.  H.  41. 

29  Coolidge  V.  Ruggles,  15  Mass.  387;  Clark  v.  :iing,  2  Mass.  524;  Weidler 
V.  Kauffman,  14  Ohio,  455;  Jones  v.  Carter,  8  Q  B.  134. 

3  0  Judson  V.  Corcoran,  17  How.  612;  Van  Buskirk  v.  Insurance  Co.,  14 
Conn.  141;  Smith  v.  Ewer,  22  Pa.  St.  IIG;  Mffchants',  etc.,  Bank  v.  Hewett, 
3  Iowa,  93;  Winberry  v.  Koonce,  83  N.  C.  35:;  Hobson  v.  Stevenson,  1  Term 
Ch.  203;  Richards  v.  Griggs,  16  Mo.  416. 


Ch.    1]       DISTINCTION    BETWEEN    ASSIGNABILITY    AND    NEGOTIABILITY.        11 

sit^nments,  not  recorded  until  some  nine  years  afterwards.  At  that 
time  the  mortgage  was  attempted  to  be  foreclosed  by  the  true  owner. 
In  the  mean  time  the  mortgagor  had  made  various  payments  upon 
tbe  mortgage,  and  finally  had  paid  it  up  in  full  to  the  original  mort- 
gagee, some  three  years  before  the  foreclosure.  These  payments, 
on  the  mortgagor's  part,  were  made  without  notice  or  knowledge 
of  the  assignments.  And  upon  these  facts  it  was  held  that  the  mort- 
gagor was  to  be  protected,  and  would  even  have  been  protected  if 
the  assignments  had  been  recorded,  because  notice  must  be  given 
or  brought  home  to  the  mortgagor  not  to  pay  the  original  mortgagee, 
else  payments  to  such  mortgagee  on  account  of  the  mortgage  are 
perfectly  valid.^^  This  is  the  logical  outgrowth  of  the  theory  of 
assignment,  as  explained  in  the  English  case  of  Stocks  v.  Dob- 
son.^  ^  "The  debtor,"  said  the  court,  "is  liable  at  law  to  the  as- 
signor of  the  debt,  and  at  law  must  pay  the  assignor  if  the  as- 
signor sues  in  respect  of  it.  If  so,  it  follows  that  he  may  pay  with- 
out suit.  The  payment  of  the  debtor  to  the  assignor  discharges  the 
debt  at  law.  The  assignee  has  no  legal  right,  and  can  only  sue  in 
the  assignor's  name.  How  can  he  sue  if  the  debt  has  been  paid? 
The  law,  therefore,  has  required  notice  to  be  given  to  the  debtor 
of  the  assignment,  in  order  to  perfect  the  title  of  the  assignee." 

There  is  another  factor  of  assignments  to  be  considered.  It  is  true 
that  the  courts  in  many  of  the  states  at  the  present  day  will  de- 
cline to  examine  into  the  consideration  of  the  assignment  of  an  or- 
dinary contract,  holding  that  a  payment  of  it  by  the  debtor  to  the 
person  who  holds  the  rights  under  a  valid  assignment  will  release 
the  debtor  from  his  liability.'^  But  it  was  probably  the  common- 
law  rule,  and  certainly  the  equity  rule,  that  an  assignment  would 
not  be  supported  unless  consideration  had  been  given  by  the  as- 
signee.^* 

31  Van  Keuren  v.  Corkins,  66  N.  Y.  77. 

3  2  Stocks  V.  Dobson,  4  De  Gex,  M.  &  G.  15. 

S3  Sheridan  v.  Mayor,  etc.,  68  N.  Y.  30;  Burtnett  v.  Gwynne,  2  Abb.  Prac. 
79;  Stone  v.  Frost,  61  N.  Y.  614;  Allen  v.  Brown,  44  N.  Y.  228;  Durgin  v. 
Ireland,  14  N.  Y.  322. 

84  Anson,   Cont.  p.  222. 


12         NEGOTIABILITY  SO  FAR  AS  IT  REI.ATKS  TO   BILLS  AND  NOTES.        [Ch.   1 

NegotiabUity. 

The  rules  in  regard  to  negotiability  are  in  sharp  contrast  to  these 
principles  governing  assignments.  With  instruments  made  payable 
in  blank  or  to  bearer  the  debtor  is  prima  facie  protected  in  pay- 
ments upon  negotiable  bills  and  notes  made  to  the  person  who  has 
the  instrument  in  his  possession.^  ^  The  person  having  the  instru- 
ment in  his  possession  is,  under  such  circumstances,  presumed  to 
own  it,  and  to  have  a  legal  right  to  it.^*  A  purchaser  in  good  faith 
from  one  who  has  stolen  them  acquires  a  valid  title.^'  If  these  were 
not  the  rules  every  bank  or  merchant  who  took  the  instrument,  and 
gave  moneA'  or  value  for  it,  would  be  compelled  to  make  inquiries, 
and  also  give  notice  of  their  ownership  of  the  instrument  to  all  prior 
parties,  to  prevent  the  instrument's  being  paid  to  some  one  eise. 
Several  results  would  inevitably  flow  from  these  conditions.  Busi- 
ness men  would  decline  to  take  such  trouble.  This  friction  would 
check  the  circulation  of  the  bill  or  note,  and  destroy  its  effectiveness 
as  a  quasi  money.  And  thus,  so  far  as  negotiable  bills  and  notes 
could  aid  it,  credit  would  no  longer  be  as  good  as  cash  in  the  com- 
mercial markets  of  the  world. 
Equities  between  Prior  Parties. 

The  last  and  perhaps  most  important  distinction  made  between 
the  transfers  of  non-negotiable  contracts  and  those  of  negotiable  bills 
and  notes  is  that  in  case  of  the  former  the  assignee  takes  subject 
to  the  equities  or  defenses  existing  between  the  prior  parties,  while 
the  bona  fide  holder  of  a  negotiable  instrument  may  disregard  these 
equities,  and  recover  upon  suit  the  full  amount  called  for  by  the 
instrument  he  buys.  According  to  the  Honorable  Theodore  Dwight,^' 
the  assignee  of  a  non-negotiable  contract  takes  subject,  not  only  to 
the  equities  existing  between  the  original  parties,  but  also  must  al- 
as Pettee  V.  Prout,  3  Gray,  502;  Way  v.  Richardson,  Id.  412;  Garvin  v. 
Wiswell,  83  III.  215;  .Tewett  v.  Cook,  81  111.  260;  Collins  v.  Gilbert,  94  U.  S. 
753;  Rubey  v.  Culbertson,  35  Iowa,  2G4;  Ecton  v.  Halan,  20  Kan.  452;  Wells 
V.  Schoonover,  9  Heisli.  SCO. 

86  Wilson  Sewing-Macb.  Co.  v.  Spears,  50  Mich.  534,  15  N.  W.  894;  Bank 
V.  Sollenberger,  1  Lancast.  Law  Rev.  75. 

3T  Spooner  v.  Holmes,  102  Mass.  503;  Birdsall  v.  Russell,  29  N.  Y.  220; 
Evei-tson  v.  National  Bank  of  Newport,  GG  N,  Y.  14.  See,  also,  cases  post,  p. 
240. 

38  Trustees  of  Union  College  v.  Wheeler,  61  N.  Y.  88. 


Ch.   1]  INDICIA    OF    NEGOTIABILITY.  13- 

waj's  abide  the  case  of  the  person  from  whom  he  buys.  The  holder 
of  a  chose  in  action  cannot  alienate  anything  but  the  beneficial  in- 
terest he  possesses.^''  It  is  a  question  of  power  or  capacity  to  trans- 
fer to  another,  and  that  capacity  is  to  be  exactly  measured  by  his 
own  rights.  This  is  undoubtedly  the  law  in  England  and  in  New 
York,  though  in  many  of  the  states  of  the  Union  the  great  authority 
of  Chief  Justice  Kent  has  prevailed  to  limit  the  equities  to  those 
Existing  between  the  original  parties,  and  does  not  extend  them  to 
those  existing  in  favor  of  third  parties.  The  technical  or  theoret- 
ical reason  of  the  rule  is  that  given  by  Judge  Story.*"  "E^ery  as- 
signment of  a  chose  in  action  is  considered  in  equity  as  in  its  nature 
amounting  to  a  declaration  of  trust  and  to  an  agreement  to  permit 
the  assignee  to  make  use  of  the  name  of  the  assignor  in  order  ta 
recover  the  debt,  or  to  reduce  the  property  into  possession."  This 
theory  leads  to  the  conclusion  that  the  action  by  the  assignee  must 
be  precisely  commensurate  with  that  of  the  assignor,  as  it  must  be 
in  his  name,  and  on  the  supposition  that,  for  the  purposes  of  the 
action,  be  is  still  the  owner. 

INDICIA  OF  NEGOTIABILITY. 

8.  The  instrument  must  contain  express  words  of  nego- 
tiability, although  there  is  no  set  form  of  such  expression. 
It  is  enough  if  the  intention  of  the  parties  to  make  it  ne- 
gotiable can  be  fairly  construed  from  the  terms  of  the 
contract. 

9.  The  usual  form  of  making  an  instrument  negotiable 
is  making  it  payable  either 

(a)  To  order,  or 

(b)  To  bearer.'^ 

8  9  Warner  v.  Wliittaker,  G  Mich.  1.33;  Seligman  v.  Ten  Eyck's  Estate,  49^ 
Mich.  104,  13  N.  W.  377;  Shotwell  v.  Webb,  23  Miss.  375;  Howell  v.  Medler, 
41  Mich.  G41,  2  N.  W.  911;  Ayres  v.  Campbell,  9  Iowa,  213;  Timms  v. 
Shannon,  19  Md.  29G;  State  Mut.  Fire  Ins.  Co.  v.  Roberts,  31  Pa.  St.  438; 
Gary  v.  Bancroft,  14  Pick.  315;  Hai-wood  v.  Jones,  10  Gill.  &  J.  404;  Scott 
V.  Schreeve,  12  Wheat.  G05. 

40  Story,  Eq.  Jur.   §  1040. 

41  McMullen  v.  Rafferty,  89  N.  Y.  456;    Cromwell  v.  Hewitt,  40  N.  Y.  491. 


14         NEGOTIABILITY  SO  FAR  AS  IT  RELATES  TO  BILLS  AND  NOTES.        [Ch.    1 

It  is  the  purpose  of  this  note  to  explain  what  form  of  words, 
when  they  occur  in  an  order  or  promise  to  pay  money,  makes  that 
order  or  promise  a  negotiable  one;  or,  in  other  words,  what  indicia 
are  those  of  negotiability.  As  has  been  said,  negotiability  is  the 
peculiar  tlieory  of  the  law  merchant,  and  the  law  merchant  has  as 
its  sources  the  enactments  of  statutes  and  the  decisions  of  judges, 
based  upon  the  theories  of  equity  and  reason  of  commercial  expe- 
diency. 

The  first  question,  then,  is,  what  indicia  are  declared  by  the  stat- 
utes to  confer  negotiability  upon  orders  or  promises  to  pay  money? 
These  indicia  consist  in  the  first  place  in  certain  words  or  phrases 
created  by  and  appearing  in  the  statute  itself.  The  statute  of 
Anne,  for  example,  declares,  in  words,  that  "all  notes  whereby  one 
doth  promise  to  pay  to  any  other  person,  his  order,  or  unto  bearer, 
shall  be  assignable  or  indorsable  over  as  inland  bills  of  exchange, 
according  to  the  custom  of  merchants."  *^ 

In  very  many  states  these  words  of  the  statute  of  Anne,  or  words 
quite  similar  to  them,  have  been  re-enacted.  In  some  states,  in  ad- 
dition to  the  foregoing  phrases,  specified  in  the  statute  of  Anne, 
peculiar  phrases  appear  to  be  essential  to  negotiability:  In  Ala- 
bama (Code  1SG7,  §  1833),  notes  must  be  payable  at  a  banker's,  or 
designated  place  of  payment.  Bills  payable  generally,  see  Gates 
V.  Bank,  100  U.  S.  239.  In  Arkansas  (Laws  1SG9),  the  words  "without 
defalcation"  must  be  used.  In  Indiana  (1  Rev.  St.  1876,  p.  63G),  notes 
must  be  payable  at  a  bank.  In  ]Missouri,  words  of  consideration  are 
necessary  to  a  note,  but  not  to  a  bill.  Gen.  St.  c.  86,  §  15.  In  Virginia 
<Code  1783,  c.  141,  §§  1,  7),  the  place  of  payment  is  necessary  on  a  note,, 
but  not  on  a  bill.  And  to  determine  whether  instruments  contain  the 
quality  of  negotiability,  we  may  first  turn  to  the  statute  of  the  state, 
and,  if  there  appear  upon  the  face  of  the  instruments  the  phrases  au- 
thorized by  the  statute,  then,  other  things  being  equal,  the  notes  are 
certainly  negotiable.  And,  as  appears  hereafter,  except  in  the  case 
of  a  restrictive  indorsement,  an  instrument  once  stamped  by  the 
original  parties  with  the  character  of  negotiability  in  most  cases 
cannot  be  deprived  of  this  characteristic,  but  remains  so  despite  the 
subsequent  agreement  or  conduct  of  the  parties  transferring  it 

♦2  Goodwin  v.  Robarts,  L.  R.  10  Exch.  337,  Johns.  Cas.  Bills  &  N.  3. 


Ch.    1]  INDICIA    OF    NEGOTIABIMTY.  16 

While  it  is  unquestioned  that  bills  and  notes,  correct  in  other  re- 
spects, drawn  in  the  words  of  the  statutes,  are  negotiable,  those 
words  are  not  the  only  forms  of  words  which  will  confer  negotia- 
bility. Some  express  words  are,  however,  necessary  to  confer  this 
quality.  A  note  in  words,^^  "8  months  after  date,  we  promise  to 
pay  G.  H.  $275,  for  value  received,"  was  held  not  a  negotiable  note, 
because  the  statute  directed  words  of  negotiability.  But  the  true 
reason  is  that  laid  down  by  Lord  Holt,**  given  in  a  case  where  the 
words  "or  his  order"  were  omitted  from  a  bill.  "And  the  chief 
justice  did  agree  that  the  indorsement  of  this  bill  did  not  make 
him  that  drew  the  bill  chargeable  to  the  indorsee,  for  the  words 
'or  his  order'  did  give  authority  to  assign  it  by  indorsement,  and  it  is 
an  agreement  by  the  first  drawer  that  he  would  answer  it  to  the  as- 
signee." 

What  words  will  then  be  deemed  by  the  courts  to  confer  negotia- 
bility? "Whether  the  parties  to  an  instrument  can  give  it  a  nego- 
tiable character,  with  all  the  incidents  pertaining  to  negotiable 
paper,  when  it  is  not  in  terms  within  the  class  of  instruments  known 
to  the  law  as  'negotiable,'  may  be  questioned,"  says  Allen,  J.,  in  Evert- 
son  V.  Bank.*°  But,  however  this  may  be  with  instruments  intended 
to  be  otherwise  than  orders  or  promises  for  the  payment  of  money 
alone,  still  it  is  probably  the  rule  that,  in  the  instruments  governed 
by  the  rules  of  the  law  merchant,  any  words  in  si  bill  or  note  whence 
it  can  be  inferred  that  the  person  making  it  intended  it  to  be  nego- 

*8  Maule  V.  Crawford,  14  Hun,  193.  See,  also,  Robinson  v.  Brown,  4  Blackf. 
128;  Femon  v.  Farmer,  1  Har.  (Del.)  32;  Yingling  v.  Kohlbass,  IS  Md.  14B; 
Barriere  v.  Nairac,  2  Dall.  249;  Whitwell  v.  Winslow,  134  Mass.  343;  Ameri- 
can Exch.  Bank  v.  Blanchard,  7  Allen,  333;  Fawsett  v.  National  Life  Ins. 
Co.,  97  111.  11;   Lowy  v.  Andreas,  20  111.  App.  521. 

44  Hill  V.  Lewis,  1  Salk.  132. 

46  Evertson  v.  National  Bank  of  Newport,  66  N.  Y.  18.  See,  also,  Crouch 
V.  Credit  Foncier  of  England,  L.  R.  8  Q.  B.  374.  In  the  case  of  Miller  v. 
Biddle,  which  was  an  action  on  a  promissoiy  note,  it  was  held  that  the  omis- 
sion of  the  words  "or  order,"  or  "or  bearer,"  made  no  difference  as  to  the 
negotiability  of  the  note.  Miller  v.  Biddle,  13  Law  T.  (N.  S.)  334;  Hasey  v. 
White  Pigeon  Beet-Sugar  Co.,  1  Doug.  (Mich.)  193;  Robinson  v.  Wilkinson, 
38  Mich.  299;  Almy  v.  Winslow,  126  Mass.  342;  Grinnell  v.  Baxter,  17  Tick. 
(Mass.)  3S6;  Daggett  v.  Daggett,  124  Mass.  149;  Judson  v.  Gookwin,  37  111. 
280. 


16         NKGOTIAnil.lTY  SO  FAR  AS  IT  RELATES  TO  BILLS  AND  NOTES.       [Ch.   1 

tiable,  will  ^ve  it  a  transferable  quality  against  that  person."  This 
is  probably  the  better  rule,  although  it  was  the  former  English  rule 
that,  unless  a  bill  or  note  be  payable  to  order  or  to  bearer,  it  was 
not  negotiable.  The  interest  of  the  parties  should,  and  probably 
would,  override  the  form  of  words,  and  if  the  court  can  determine 
from  the  words  used  that,  as  a  matter  of  fact,  it  was  the  intention 
of  both  of  the  parties,  the  one  to  assume  the  rights  of  a  holder  of  a 
negotiable  instrument,  and  the  other  to  incur  the  liabilities  of  a 
party  thereto,  and  the  instrument  in  other  essential  respects  con- 
tains the  elements  of  a  negotiable  bill  or  note,  the  instrument  would 
probably  be  treated  as  negotiable  although  formally  incorrect 

PURPOSE  OF  NEGOTIABILITY. 

10.  Negotiable  bills  and  notes  in  some  respects  play  the 
part  of  money  in  business  aflfairs.  They  are  used  to  trans- 
fer property  or  rights  by  means  of  individual  or  corporate 
credits.  The  fundamental  purpose  of  negotiability  is  to 
endow  them  with  all  facilities  necessary  for  a  limited  com- 
mercial medium.*^ 

The  business  aim  of  negotiable  bills  and  notes  is  to  furnish  for 
public  use  a  sort  of  money.* ^  The  way  in  which  this  aim  is  realized 
by  the  courts  is  by  their  formulating  and  establishing  the  some- 

48  u.  S.  V.  White,  2  Hill,  59;    Gibson  v.  Minot,  1  H.  Bl.  5G9;    Mechanics* 

Bank  v.  Straiton,  3  Abb.  Dec.  2G9. 

47  Illustration  of  the  use  of  a  negotiable  instiniment  as  a  circulating  medium: 
If  A  and  B  are  in  England,  and  C  in  Jamaica  be  indebted  to  A. £1,000,  and 
B  be  going  to  Jamaica,  he  may  pay  A  this  £1,000  and  take  a  bill  of  exchange 
drawn  by  A  in  England  upon  C  in  Jarqaica.  B,  on  his  way  to  Jamaica,  may 
be  paid  the  £1,000  for  the  bill  by  D  in  New  York,  and  indorse  it  to  him;  D 
may  be  paid  for  the  bill  £1,000  by  B  In  Charleston,  and  indorse  it  to  him; 
and  E  will  collect  the  money  of  C,  to  whom  it  is  presented  for  acceptance, 
in  Jamaica,  and  who  accepts  it. 

See  Russell  v.  Whipple,  2  Cow.  (N.  Y.)  53(J;  Durgin  v.  Bartol,  64  Me.  473; 
Goodwin  v.  Robarts,  L.  R.  10  Exch.  337,  Johns.  Cas.  Bills  &  N.  3. 

48  Bills  of  exchange  and  promissory  notes  are  representatives  of  money, 
circulating  in  the  commercial  world  as  such.  Friedlander  v.  Texas  &  P.  Ry. 
Co.,  9  Sup.  Ct.  570,  130  U.  S.  416;   Id.,  Johns.  Cas.  Bills  &  N.  11. 


Ch.    1]  PURPOSE    OF    NEGOTIABILITY.  17 

what  artificial  rules  we  shall  hereafter  discuss.  These  rules  all 
point  to  one  end, — the  protection  of  the  bona  fide  holder  so  far  as 
that  is  consistent  with  justice  to  the  other  parties  to  the  instrument 
It  is  necessary,  as  we  shall  hereafter  see,  that  the  order  or  promise 
contained  in  a  bill  or  note  should  be  definite,  so  that  the  person  re- 
ceiving it  in  exchange  for  merchandise  or  other  value  may  know 
that  he  is  exchanging  a  right  that  is  equivalent  to  value,  for  value 
itself;  that  it  should  be  for  money  onl}',  because,  from  a  commer- 
cial as  distinguished  from  a  politico-economical  standard,  money  is 
the  only  thing  in  business  whose  value  does  not  fluctuate.  And  so, 
through  the  entire  system,  in  laying  down  their  rules,  the  courts 
have  asked  themselves  these  questions:  Is  the  application  of  the 
rule  just  for  all  parties,  and,  all  things  being  considered,  the  most 
expedient  for  commerce?  And,  second,  is  the  rule  such  that  a  per- 
son taking  the  bill  or  note  in  exchange  for  something  of  value  will 
be  protected  in  the  enforcement  of  the  bill  or  note,  as  a  legal  right, 
if  it  is  not  paid?  This  idea  once  understood  by  the  student,  the 
scattered  and  seemingly  irrelevant  rules  become  consecutive  parts 
of  a  consistent  theory. 

Probably  the  primary  object  of  negotiability  is  to  give  to  bills  or 
notes  the  effect  which  money,  in  the  shape  of  government  bills  or 
notes,  plays  in  commercial  transactions.  These  last  are  an  un- 
questioned legal  tender  or  medium  of  payment  for  debts,  or  for  the 
transfer  of  property  or  rights.  They  are  such  an  unquestioned 
medium  because  the  credit  or  solvency  of  the  government,  which  has 
caused  them  to  be  issued,  is  behind  them.  It  is  the  distinct  prom- 
ise of  a  whole  nation  to  excliange  for  the  bill  or  note  itself,  in  pre- 
cious metal,  a  sum  of  money  intrinsically  worth  its  face.  But  there 
is  a  distinction  between-  the  bank  or  government  bill  and  the  nego- 
tiable bill  or  note.  The  former  is  value  itself,  and  present  pay- 
ment, the  latter,  a  direction  or  promise  to  pay  in  the  future.  The 
bank  or  government  bill,  because  of  the  government  credit  behind 
it,  is  in  business  an  instrument  in  itself  of  intrinsic  value.  The  bill 
or  note  depends  for  its  value  upon  the  credit  of  the  parties  to  it. 

A  man's  credit  is  rated  at  the  amount  of  property  or  valuable 
rights  he  can  procure.  He  makes  this  credit  available  in  his  bill 
or  note  because  his  credit  is  its  guaranty  of  future  payment.  The 
elements  of  credit  may  be  either  his  earning  capacity  or  the  accumu- 

NEG.  BILLS 2 


18         NEGOTIABILITY  SO  FAR  AS  IT  RELATES  TO  BILLS  AND  NOTES.       [Ch.    1 

lated  property  be  owns.  Business  men  rely  upon  these  as  tlie 
source  of  probable  future  payment.  And  so  merchants  sell  goods 
to  people,  and  banks  discount  their  notes  and  drafts.  And  busi- 
ness men  who  thus  have  no  property  in  cash  are  by  means  of  credtt 
enabled  to  conduct  and  carry  to  completion  business  and  commer- 
cial enterpnses.  Other  business  men  will  take  these  promises  of 
men  of  undoubted  credit,  and  treat  them  as  cash.  And  thus  we 
see  bills  and  notes  going  from  hand  to  hand  in  the  commercial  mar- 
kets, and  credit  taking  the  part  of  money  in  commercial  transac- 
tions. And  here,  perhaps,  a«  a  part  of  this  theory  of  negotiability, 
it  is  well  to  show  how  far  and  under  what  circumstances  courts 
have  treated  negotiable  instruments  as  liquidation  of  indebtedness. 

PAYMENT  BY  NEGOTIABLE  INSTRUMENT. 

11.  The  common  rules  regarding  a  negotiable  instrument 
as  a  medium  of  payment  are  as  foUo-wrs: 

(a)  In  most  jurisdictions  a  negotiable  instrument  given 

by  one  person  to  another  for  a  debt  does  not 
discharge  it  unless  such  be  the  agreement  of  the 
parties;  suit  may  be  brought  upon  the  maturity 
of  the  note  either  upon  the  original  consideration 
or  upon  the  instrument  itself. 

(b)  A  negotiable  instrument,  made  by  a  third  person, 

and  given  -without  indorsement  for  a  cotempo- 
raneous  debt,  is  deemed  to  have  been  given  in 
payment  and  satisfaction  unless  the  contrary  be 
expressly  proved;  and  in  such  case  the  onus  is 
upon  the  person  receiving  the  paper. 

(c)  A  negotiable   instrument  made   by  a  third   person 

and  indorsed  in  consideration  of  a  cotemporane- 
ous  debt,  or  given  -without  indorsement  for  a 
precedent  debt,  is  not  deemed  to  have  been  taken 
in  payment,  and  the  onus  of  proving  such  fact 
is  upon  the  debtor. 

The  foregoing  rules  formulate  the  principal  methods  by  which 
negotiable  instrimients  operate  as  a  quasi  money.     The  student, 


Ch.    1]  PAYMENT    BY    NEGOTIABLE    INSTRUMENT.  19 

at  a  glance,  will  see  that  theyiire  not  as  effective  as  government  bills 
are.  Government  bills  have  a  present  value.  They  are  legal  ten- 
der for  the  payment  of  debts.  Once  being  offered  to  him  in  pay- 
ment of  an  indebtedness,  a  creditor  cannot  procure  any  further 
remedy  in  the  courts,  but  himself  must  pay  the  costs  of  litigation, 
if  he  seeks  one.  Ordinary  negotiable  instruments  are  different  from 
government  paper,  in  that  they  are  mere  choses  in  action.  They 
have  a  prospective,  and  not  a  present,  value.  No  man  can  be  com- 
pelled to  take  them  for  the  payment  of  a  debt  unless  he  chooses  to 
do  so.  And  once  being  taken  in  payment  of  debt,  it  is  at  best  only 
a  substitution  of  one  right  of  action  for  another.  If  when  the  in- 
strument becomes  due,  the  parties  obligated  refuse  payment  of  it, 
the  creditor  must  go  into  court  and  sue  upon  the  instrument  itself. 
And  the  points  for  the  student  to  examine  are,  whether  the  instru- 
ment taken  on  account  of  a  debt  discharges  the  debt,  and  merges  the 
debt  in  the  instrument  received  by  the  creditor,  so  that  he  can  have 
recourse  to  that  alone,  or  whether  it  is  simply  a  collateral  security 
and  suspends  the  collection  of  the  debt  during  its  currency.  Upon 
these  questions  indebtedness  is  classified  as  of  two  kinds.  The  first 
is,  the  pre-existing  or  antecedent  indebtedness;  the  second,  the  debt 
created  at  the  time  the  instrument  is  delivered.  Of  course  in  every 
case,  if  it  is  agreed  between  the  creditor  and  debtor  that  the  instini- 
raent  be  taken  in  payment  of  a  debt,  then  it  is  immaterial  whether 
the  indebtedness  be  antecedent  or  cotemporaneous ;  whether  the 
instrument  be  that  of  the  parties  or  of  a  third  person,  transferred 
with  or  without  indorsement.  In  all  cases  it  is  payment,  and  the 
original  indebtedness  is  merged  because  the  creditor  and  debtor 
have  expressly  agreed  it  should  be  so.  The  contract  right  thus 
created  supersedes  all  else  in  the  transaction.  But  where  nothing 
is  said  between  creditor  and  debtor,  and  the  creditor  has  as  much 
right  to  say  that  it  was  either  a  suspension  of  payment,  or  even  no 
suspension  at  all,  as  the  debtor  has  to  say  it  was  a  merger  of  the 
indebtedness,  it  is  left  for  the  courts  to  put  a  construction  upon  the 
transaction. 

A  negotiable  instrument  is  an  executory  contract.  It  is  a  mere 
order  or  promise  of  future  payment.  Where  it  is  given  for  a  pre- 
existing debt  the  law  has  already  implied  a  promise  of  payment  The 
debtor  therefore  was  already  the  debtor  on  a  promise,  and  in  giv- 


20        MXUJTIABII.ITY  SO  l-'AR  AS  IT  RELATES  TO  BILLS  AM)  NOTES.       [Ch.    1 

ing  the  creditor  the  iustrument  makes  him  another  promise.  In 
this  transaction  there  is  nothing  over  and  above  the  original  debt. 
Tlie  order  or  promise  in  such  an  instrument  is  a  security  of  no 
higher  degree  than  the  implied  promise.  There  was  thus  no  consid- 
eration for  the  new  instrument.  It  is  merely  a  new  promise  to  do 
a  thing  which  the  debtor  was  bound  to  do  before,  and  he  cannot 
refuse  in  law  to  perform  the  old  promise,  because  he  has  promised 
it  again  and  again.  And  the  creditor  may  surrender  or  cancel  the 
instrument  at  the  trial,  and  proceed  upon  the  original  indebtedness, 
because  each  subsequent  promise  to  perform  it  was  a  mere  nudum 
pactum.*®  The  courts  have  passed  beyond  the  true  meaning  of 
this  rule  in  saying  that,  because  the  instrument  is  a  nudum  pactum, 
therefore  it  is  not  even  an  extension  of  indebtedness.  Their  reason- 
ing is,  that  a  promise  to  extend  time  of  payment,  unless  founded  upon 
a  good  consideration,  is  void,  because  a  promise  by  a  debtor  to  pay 
a  debt  past  due,  at  a  future  day,  is  not  a  consideration  for  the  prom- 
ise of  the  creditor  to  extend  the  time  of  payment.  The  debtor,  in 
discharging  his  legal  obligation  to  the  creditor  by  repeating  the 
promise  which  the  law  has  already  created  for  him,  confers  no  ben- 
efit upon  the  creditor,  nor  does  he  himself  suffer  a  detriment  at  the 
r-reditor's  hands  which  the  law  calls  a  sufficient  consideration  for  such 
an  agreement.^"  And  the  courts,  following  the  logic  of  this  general 
r»le  to  what  seems  an  extreme,  have  established  the  principle  that, 

<9  Smith  v.  Chester,  1  Term  R.  655;  Bank  of  U.  S.  v.  Daniel,  12  Pet.  32; 
Lewis  V.  Davisson,  29  Grat.  2G6;  McLaren  v.  Hall,  2G  Iowa,  298;  Archibald 
V.  Argall,  53  111.  307;  Logan  v.  Attix,  7  Iowa,  77;  Jones  v.  Shawhan,  4  Watts 
&  S.  261;  Lee  v.  Green,  83  Ala.  491,  3  South.  785;  McGuire  v.  Bidwell,  64 
Tex.  43;  Henry  v.  Conley,  48  Ark.  271,  33  S.  W.  181;  Hopkins  v.  Detwiler,  25 
W.  Va.  748;  Reeder  v.  Nay,  95  Ind.  164;  Selby  v.  McCuUough,  26  Mo.  App. 
67;  Riverside  Iron-Works  v.  Hall,  64  Mich.  168,  31  N.  W.  152;  Geib  v.  Reyn- 
olds, 35  Minn.  331,  28  N.  W.  923;  Merrick  v.  Bouit,  4  Ohio  St.  60;  Cole  v. 
Sackett,  1  Hill  (N.  Y.)  516. 

(Memo.)  It  is  to  be  obsei-ved  that  the  courts  of  Massachusetts,  Maine,  Ver- 
mont, Indiana,  and  Louisiana  have  held  that  the  taking  of  a  bill  or  note  on 
account  of  a  precedent  debt  is  presumed  to  be  a  satisfaction  of  subject  tc 
the  right  to  introduce  parol  evidence  to  rebut  this.  O'Connor  v.  Hurley,  141 
Mass.  149,  16  N.  E.  764;  Gooding  v.  Morgan,  37  Me.  419;  Olvey  v.  Jackson, 
106  Ind.  286,  4  N.  E.  149. 

50  Reynolds  v.  Ward,  5  AYend.  502;  Parmelee  v.  Thompson,  45  N.  Y.  58; 
Gibson  v.  Renne,  19  Wend.  389;   Kellogg  v.  Olmsted,  25  N.  Y.  189. 


Vh.    1]  PAYMENT    BY    NEGOTIABLIC    INSTRUMENT.  21 

where  there  is  no  express  agreement  for  an  extension,  the  accept- 
ance of  bills  or  notes  in  and  of  themselves  is  not  such  an  extension 
of  indebtedness,  that  the  creditor  may  not  surrender  the  notes  be- 
fore they  are  due,  and  proceed  upon  the  original  indebtedness."^ 
In  contrast  to  the  rule  thus  established,  the  rule  more  consist- 
ent with  business  sense  would  seem  to  be  that  the  acceptance  of 
such  a  bill  or  note  would  be  an  extension  of  indebtedness.  In 
its  legal  aspect,  the  bill  or  note  is  an  express  agreement,  because 
its  acceptance  certainly  evidences  an  intention  of  the  creditor  to 
allow  a  postponement  of  the  debt.  It  may  surely  be  considered  a  detri- 
ment to  the  debtor  to  waive  all  defenses  he  may  have  by  subjecting 
himself  to  the  liability  of  transfer  of  the  instrument  into  the  hands 
of  a  bona  fide  holder,  who  might  collect  it  in  any  event  when  due. 
And  the  cases  contrary  to  the  foregoing  rule,  while  they  do  not  pre- 
ponderate, still,  where  the  law  is  unsettled,  are  entitled  to  weight  and 
consideration.^^ 

The  other  aspect  of  bills  and  notes,  treated  as  a  medium  of 
payment,  is  where  the  paper  of  some  third  person  is  given  for  an 
indebtedness.  In  the  absence  of  any  express  agreement,  where 
the  debt  Avas  created  at  the  time  of  transfer,  the  parties  are  pre- 
sumed to  have  intended  payment  to  have  been  made  in  cash.  And 
where  this  supposed  intention  is  modified  by  the  acceptance  of  a 
negotiable  instrument  of  a  third  person  in  lieu  of  cash,  then  the 
courts  interpret  the  transaction  as  meant  by  the  parties  to  have 
the  same  end.  Cash  would  have  been  payment,  and  the  instrument 
of  the  third  person  was  manifestly  in  lieu  of  cash,  and  therefore 
it  also  is  payment. ^^  Such  was  the  view  of  the  courts  in  the  early 
development  of  law.  "If  a  man  has  a  bill  payable  to  him  or  bearer, 
and  he  delivers  it  over  for  money  received,  without  indorsement, 
this  is  a  plain  sale  of  the  bill;   and  he  who  sells  it  does  not  become 

•1  Warren  v.  Hodge,  121  Mass.  lOG;  Graham  v.  Negus,  55  Hun,  440,  8  N 
Y.  Supp.  679;  Moore  v.  Fitz,  59  N.  H.  572;  Gordon  v.  Price,  10  Ired.  385 
McNeil  V.  McCamley,  6  Tex.  163;  Marstiall  v.  Marshall,  42  Ala.  149;  Guion  v 
Doherty,  43  Miss.  538;  Welch  v.  Allington,  23  Cal.  322;  Breitung  v.  Liu 
dauer,  37  Mich.  217;    Poole  v.  Rice,  9  W.  Va.  73;    Walsh  v.  Lennon,  98  111.  27 

52  Daniels,  Neg.  Inst.  (4th  Ed.)  §  1272,  and  cases  cited  in  the  footnote. 

53  Whitbeck  v.  Van  Ness,  11  Johns.  409;  Clark  v.  Mundal,  1  Salk.  124;  12 
Mod.  203;    Bank  of  England  v.  Newman,  1  Ld.  Raym.  442. 


22         NEGOTIABILITY  SO  FAR  AS  IT  RELATES  TO  BILLS  AND  NOTES.        [Ch.    1 

a  new  security,"  was  the  declaration  of  Lord  Holt."**  And  this  waa 
adopted  and  reiterated,  and  for  a  long  time  regarded  as  doctrine 
settled  beyond  dispute.  In  the  event  of  the  bill  being  dishonored, 
the  person  who  took  it  could  not  recover  the  price  of  his  goods 
from  the  buyer,  for  the  bill  was  considered  as  a  satisfaction."^'  But 
it  was  seen  that  this  rule  worked  injustice.  And  the  creditor  was 
allowed,  if  he  could,  to  come  in  and  rebut  the  presumption  with 
which  he  was  burdened  in  his  case,  and  to  show  that  it  was  not  in 
fact  the  intention  of  the  parties  that  the  instrument  should  be 
taken  as  payment.  °° 

"V^Tiere,  however,  a  pre-existing  debt  is  the  consideration  for  the 
transfer,  the  reasons  we  have  given  for  this  rule  do  not  obtain. 
There  is  no  cause  to  suppose  that  the  parties  intended  to  take 
the  instrument  as  cash,  and  therefore  as  payment,  because  the 
transaction  under  which  the  indebtedness  was  created  was  rather 
to  be  supposed  one  in  which  the  creditor  had  agreed  to  extend 
credit,  because  he  had,  as  a  matter  of  fact,  so  extended  it  Noth- 
ing being  agreed  upon,  the  only  fact  which  the  courts  can  lay 
hold  of  to  construe,  is  the  fact  that  the  debt  is  existent  Hence 
the  implication  is  that  the  contract  was  to  give  credit  at  the 
time  the  debt  was  originally  created,  and  therefore  the  giving  of 
the  instrument  of  the  third  person  was  no  modification  of  it  The 
presumption  therefore  is  that  such  instrument  was  not  given  and 
received  in  payment  so  as  to  discharge  the  debtor  from  his  debt, 
and  to  substitute  some  one  else's  liability  in  place  of  his  own,  but 
was  taken  merely  as  collateral  security. ^^  And  the  onus  of  es- 
tablishing the  fact  that  it  was  so  taken  in  payment  is  upon  the 
debtor. ^^  The  courts  give  a  similar  interpretation  to  the  act  of  the 
debtor,  if  he  indorses  the  instrument,  either  in   consideration   of 

64  Bank  of  England  v.  Newman,  1  Ld.  Raym.  442. 
6  5  Emly  V.  Lye,  15  East,  12. 

66  Noel  V.  Mun-ay,  13  N.  Y.  167;  Gibson  v.  Tobey,  46  N.  Y.  637;  Hall  v. 
Stevens,  116  N.  Y.  201,  22  N.  E.  374. 

67  A  creditor  who  receives  a  negotiable  promissory  note  as  further  security 
for  a  pre-existing  debt  does  not  become  a  holder  for  value.  Bay  v.  Codding- 
ton,  5  Johns.  Ch.  (N.  Y.)  54;  Dennis  v.  Piper,  21  111.  App.  169;  Gardner  v. 
Gager,  1  Allen  (Mass.)  502. 

cs  Noel  V.  Murray,  13  N.  Y.  167;  Shelhy  v.  Manderville,  6  Cranch,  2.53; 
Gallagher  v.  Roberts,  2  Wash.  C.  C.  191,  Fed.  Gas.  No.  5,195;   Newall  v.  Hus- 


Ch.    1]  PAYMENT    BY    NEGOTIABLE    INSTRUMENT.  23 

an  antecedent  or  of  a  cotemporaneous  debt.  They  argue  that  the 
natural  inference  of  such  an  act  is  that  the  creditor  must  be  sup- 
posed to  know  nothing  of  the  solvency  of  the  maker  or  acceptor, 
but  that  upon  the  debtor's  indorsement  the  contract  between  the 
creditor  and  debtor  was  that  the  debtor  would  pay  the  note  if  some 
other  person  did  not.  An  indorsement  in  law  is  but  a  new  bill  or 
note,  and  therefore,  when  the  debtor  gives  the  bill  or  note  of  a 
third  person,  and  indorses  it,  he  is,  so  far  as  payment  is  concerned, 
in  exactly  the  same  position  as  if  he  had  given  his  own  note. 
Therefore,  the  rules  which  apply  upon  the  giving  of  his  own  note 
must  be  applied  when  he  indorses  the  instrument  of  a  third  per- 
son. "•  These  reasons  are  particularly  applicable  in  the  giving 
and  receiving  of  new  bills  and  notes  in  renewal  of  ones  already 
due,  which  are  not  surrendered,  but  are  retained  by  the  holder.  The 
former  cannot  be  construed  to  be  in  extinguishment  of  the  latter, 
because  the  renewal  bills  or  notes  are  of  no  higher  dignity  in  law 
than  the  ones  already  due,  nor  do  they  put  the  holder  in  a  better 
position  than  he  was  before.  In  fact,  they  benefit  the  debtor,  be- 
cause they  give  him  a  further  day  of  payment,  and  hence  should  not 
be  turned  to  the  prejudice  of  the  creditor  by  depriving  him  of  rights 
he  might  already  have.*" 

sey,  18  Me.  249;  INIcGinn  v.  Hohnes,  2  Watts,  121;  Dougal  v.  Cowles,  5  Day, 
511;   Slocumb  V.  Holmes,  1  How.  (Miss.)  139;   Case  v.  Hall,  5  Mo.  59. 

6  8  Monroe  v.  Hoff,  5  Denio,  360;   Daniel,  Neg.  Inst.  §  1265. 

eo  Bishop  v.  Rowe,  3  Maule  &  S.  362;  Cumber  v.  Wane,  1  Strange,  420; 
Woods  y.  Woods,  127  Mass.  141;  East  River  Bank  r.  Butterworth,  45  Barlx 
476. 


24  OF    NEGOTIABLE    BILLS    AND    NOTES.  [Oh.   2 


CHAPTER  n. 

OP    NEGOTIABLE    BILLS  AND   NOTES.    AND  THEIR   FORMAL  AND 

ESSENTIAL  REQUISITES. 

12.  Definition  and  Forms  of  Bills  of  Exchange. 

13.  Definition  and  Form  of  Note, 

14.  Essentials  of  Bill  or  Note. 

15.  Order  Contained  in  Bill. 

16.  Promise  Contained  in  Note. 

17-22.  Certainty  as  to  the  Terms  of  the  Order  or  Promise. 

2.3-20.  Payment  of  Money  Only. 

27-31.  Specification  of  Parties. 

82-34.  Capacity  of  Parties. 

35-37.  Delivery  of  Instruments. 

38.  Date. 

39.  Value  Received. 

40.  Days  of  Grace. 


DEFINITION  AND  rORMS  OF  BILLS  OF  EXCHANGE. 

12.  A  bill  of  exchange  is  cominonly  defined  as  an  un- 
conditional -written  order  upon  one  person  by  another  for 
the  payment  of  a  sum  of  money  at  a  specified  time  abso- 
lutely and  at  all  events.' 

Bills  of  exchange  are  classified  as  foreign  bills  and  in- 
land bills. 

»  3  Kent,  Comm.  p.  74.  This  definition  Is  taken  from  Bayley  on  Bills  (page 
1),  and  is  adopted  by  Chancellor  Kent  It  is  criticised  by  Judge  Story,  and 
apparently  rejected  by  him  (Story,  Bills,  §§  2-4),  but  Is  generally  followed 
and  accepted  as  the  usual  definition  of  a  bill  of  exchange  (see  Wood's  Byles, 
Bills  &  N.  p.  1,  and  footnote).  The  student  is  recommended,  however,  to  fix 
in  his  mind  rather  the  statement  of  the  essential  elements  of  bills  as  given  In 
section  14,  than  the  formulated  definition. 


Cll.   2]  DEFINITION    AND    FORMS    OF    BILLS    OP    EXCHANGE.  25 

The  following  is  a  common  form  of  foreign  bill  of  exchange  in 

BiitTalo,  N.  Y.,  U.  S.  A.,  June  15,  1891. 

First.     Exchange  for  LondouQ  ^ 

Thirty  days  after  siglUJ  of  thi^First  of  Exchange  (Second  and 

©         Third  Unpaid)  pay  to  iTie  ord<«-  of  JOHN  SMITH  Five  Hun- 

O  0.0 

)5         drcd  Pounds  Sterling, Qjilue  r^eived,  and  charge  the  same  to 

«         account  of  O  =>  THOMAS  ROBINSON. 

o      ■= 

To  Baring  Bros.  &  Co.  ^  ^ 

London,  Eng. 

Buffalo,  N.  Y.,  U.  S.  A.,  June  15.  1891. 
Second.     Exchange  for  London. 

Thirty  days  after  sight  of  this  Second  of  Exchange  (First  and 
©  Third  Unpaid)  pay  to  the  order  of  JOHN  SMITH  Five  Hun- 
ijj  dred  Pounds  Sterling,  value  received,  and  charge  the  same  to 
^        account  of  THOMAS  ROBINSON. 

To  Baring  Bros.  &Co., 

London,  Eng. 

Buffalo,  N.  Y.,  U.  S.  A.,  .Tune  15,  1891. 
Third.     Exchange  for  London. 

Thirty  days  after  sight  of  this  Third  of  Exchange  (First  and 
©  Second  Unpaid)  pay  to  the  order  of  JOHN  SMITH  Five  Hun- 
J5  dred  Pounds  Sterling,  value  received,  and  charge  the  same  to 
^        account  of  THOMAS  ROBINSON. 

To  Baring  Bros.  &  Co., 

London,  Eng. 

The  following  is  a  usual  form  of  an  inland  bill: 

$500.00.  fZ  jj  Buffalo.  June  15,  1891. 

Thirty  days  after  sight  pay  tUJthe  or<«  r  of  JOHN  SMITH  Five  Hun- 
dred Dollars,  value  received,  ?«  d  charSi  to  account  of 

^  ^         THOMAS  ROBINSON. 

To  Baring  Bros.  «&  Co.,  q  - 

New  York  City.<  oo 

The  parties  to  the  foregoing  bill  are  technically  termed:  (a)  The 
drawer,  or  the  party  who  orders  the  payment  of  the  money  in  the 
bill,  e.  g.  Thomas  Robinson,  (b)  The  drawee,  or  the  party  to  whom 
the  order  is  directed,  e.  g.  Baring  Bros,  (c.)  The  acceptor,  or  the 
drawee  when  he  has  assented  to  the  order,  and  thus  become  the 
principal  debtor  on  the  bill,  e.  g.  Baring  Bros,     (d)  The  payee,  or 


26  OF    NEGOTIABLE    BILLS    AND    NOTES.  fCh.    2 

the  party  in  whose  favor  the  order  is  made,  e.  g.  John  Smith.  These 
are  the  parties  to  the  bill  in  its  origin.  There  are  also  subsequent 
parties:  (e)  The  holder,  or  the  person  having  legal  possession  of  the 
bill,  who,  when  it  is  negotiable,  may  recover  the  amount  of  the 
same.  This  term  includes  payee,  indorsee,  or  bearer,  (f)  The  in- 
dorser,  or  one  who  directs  the  amount  of  the  bill  to  be  paid  to  a 
person  in  the  indorsement  named,  or  to  his  order  or  to  bearer,  (g) 
The  indorsee,  or  one  who  makes  title  to  the  bill  through  the  order 
specified  in  the  last  foregoing. 

A  bill  of  exchange  is  usually  called  among  business  men  "a  draft" 
Such  a  bill,  when  duly  accepted,  is  called  an  "acceptance." 

Under  the  FJnglish  law,  bills  drawn  or  payable  abroad,  or, 
until  quite  recent  times,  drawn  in  England  and  payable  in  Scot- 
land or  Ireland,  or  vice  versa,  were  foreign  bills.  Bills  drawn 
and  payable  either  in  England  or  Wales  were  inland  bills.  In  the 
United  States  the  general  rule  is  that  a  bill  drawn  in  one  state  and 
payable  in  another  is  a  foreign  bill,^  the  idea  being  in  the  United 
States  that  the  several  states,  retaining  in  themselves  the  power  to 
make  local  business  regulations  and  laws,  are  thus  far  separate 
and  independent  sovereignties,  and  to  be  so  \iewed  in  the  decision 
of  points  involved  in  the  law  merchant.  Aside  from  these  local 
regulations,  the  principal  difference  in  the  United  States  between 
the  foreign  and  inland  bill  is  that  to  charge  the  drawer  and  in- 
dorsers  the  former  on  dishonor  requires  protest  by  a  notary  public, 
the  latter  does  not*  In  the  case  of  international  foreign  bills,  a 
further  usage  of  long  standing  has  existed,  arising  from  the  difB- 
culty  of  communication  in  fonner  times  between  different  nations 
and  the  danger  of  loss  in  travel.  It  is  to  draw  the  bill  in  a  set  of 
three  or  four  parts,  each  a  counterpart  of  the  other,  except  that  in 
each  part  of  the  set  was  incorporated  a  condition  that  that  partic- 
ular bill  should  only  be  payable  provided  all  the  others  remained 

»  Halliday  v.  McDougall,  20  Wend.  81,  22  Wend.  264;  Commercial  Banfe 
V.  Varnum,  49  N.  Y.  2G9;  Dickens  v.  Beal,  10  Pet.  572;  Bank  of  U.  S.  v. 
Daniel,  12  Pet.  32;  Phoenix  Bank  v.  Hussey,  12  Pick.  483;  Grimshaw  t. 
Bender,  6  Mass.  157;   Barclay  v.  Minchin,  Id.  162. 

*  Union  Bank  v.  Hyde,  6  Wheat  572;  Burke  v.  McKay,  2  How.  66;  Young 
V,  Bryan,  6  Wheat.  146.  See  collated  cases,  foot  note  to  Wood's  Byles,  Bills 
&  N.  p.  261. 


Ch.   5^]  DEFINITION    AND    FORM    OF    NOTE.  27 

unpaid.  This  condition  operates  as  a  notice  to  the  acceptor  to  ac- 
cept and  pay  but  one  bill,  and  he  and  the  drawer  are  liable  upon  but 
one  bill;  for  it  is  well-settled  law  that  a  payment  of  one  of  a  set 
operates  as  a  discharge  of  the  rest.  The  whole  set  collectively  is 
deemed  to  amount  to  but  one  bill.^  The  rule  that  a  payee  or  sub- 
sequent indorser,  who  indorses  two  or  more  parts  of  a  bill  to  sep- 
arate indorsees,  is  liable  on  indorsement  to  each  separate  indorsee, 
operates  as  a  check  to  the  improper  circulation  of  the  bill.  The 
transferrer  is  bound  to  pass  over  upon  transfer  all  parts  of  the  bill  in 
his  possession,  and  thus  the  circulation  of  these  instruments  may 
be  effected  with  safety.* 

DEFINITION  AND  FORM  OF  NOTE. 

13.  A  promissory  note  is  commonly  defined  as  an  un- 
conditional -written  promise,  signed  but  not  sealed  by  the 
maker,  to  pay  absolutely  and  at  all  events  a  sum  certain 
in  money,  either  to  the  bearer  or  to  a  person  therein 
designated  or  to  his  order.* 

A  common  form  of  note  is: 

jsc  $500,00.  Buffalo.  June  15,  1891. 

^         Thirty  daj's  after  date  I  promise  to  pay  to  the  order  of  JOHN 

^  SMITH  Five  Hundred  Dollars,  value  received,  at  Bank  of  Buf- 

«  falo.  THOMAS  ROBINSON. 

The  parties  to  the  foregoing  note  are  technically  termed: 

(a)  MAKER — The  person  who  signs  the  note  and  makes  the 

promise;  e.  g.  (Thomas  Robinson.) 

(b)  PAYEE — The  person  in  whose  favor  the  promise  contained 

in  the  note  is  made;  e.  g.  (John  Smith.) 
Subsequent  Parties  to  Bill  or  Note. 

B  3  Kent,  Comm.  109;  Wells  v.  Whitehead,  15  Wend.  527;  Durkln  v.  Crans- 
ton, 7  Johns.  442. 
*  Pinard  v.  Klockmann,  3  Best  &  S.  388,  32  Law  J.  Q.  B.  82, 
8  Chalm.  Bills  &  N.  art  271;  Edw.  Bills  &  N.  §  134;  Byles,  Bills  (Wood's 
Ed.)  p.  41;  Daniel,  Neg.  Inst.  §  28.  The  student  is  here  recommended  to  fix 
In  his  mind  rather  the  statement  of  the  essential  elements  of  a  note  than  the 
formulated  definition. 


28  OF    NEGOTIABLE    BILLS    AND    NOTES.  [Cll.    2 

The  foregoing  are  parlies  to  the  note  in  its  origin.      There  are 
also  subsequent  parties.      They  are: 

(a)  HOLDER — The  person  having  legal  possession  of  the  instru- 

ment, who,  when  it  is  negotiable  under  the  law  merchant, 
may  recover  the  amount  of  same.  This  term  includes 
pa^ee,  indorsee,  or  bearer. 

(b)  INDORSER— One  who  directs  the  amount  of  the   bill   or 

note  to  be  i)aid  to  a  person  in  the  indorsement  named, 
or  to  his  order,  or  to  bearer. 

(c)  INDORSEE — One  who  makes  title  to  the  instrument  through 

the  order  specified  in  the  last  foregoing. 


ESSENTIALS  OF  BILL  OR  NOTE. 

14.  To  be  a  negotiable  bill  of  exchange  or  promissory- 
note,  the  instrument  must  have  the  following  essential 
characteristics: 

(a)  The  bill  must  contain  an  order. 

(b)  The  note  must  contain  a  promise. 

(c)  The  order  or  promise  must  be  unconditional. 

(d)  It  must   be  an  absolute  promise  for  the  payment 

of  money  alone. 

(e)  The   amount   of  money  and   its   time   of  payment 

must  be  certain. 

(f )  The  instrument  must  be  specific  as  to  all  its  parties. 
(gj  The  instrument  must  be  delivered. 

ORDER   CONTAINED  IN  BILL. 

15.  An  order  means  any  form  of  -words  implying  a  right 
on  the  part  of  the  drawer  to  demand  payment  of  the 
money  specified  in  the  draft,  and  a  corresponding  duty  to 
pay  on  the  part  of  the  person  on  "whom  demand  is  made. 

Our  purpose  here  is  to  illustrate  the  difference  between  a  man- 
datory form  of  words  directing  some  one  to  pay  money  which 
he  owes,  and  which  can  be  circulated  as  a  negotiable  instrument, 


Ch.    2]  ORDER    CONTAINED    IN    BILL.  29 

and  a  mere  request  for  a  loan,  which  can  have  no  value  in  the  com- 
mercial market.  The  distinction  sought  to  be  maintained  is  that 
between  a  direction  or  a  command  and  a  request.  The  theory  is 
that  the  drawer  has  funds  in  the  hands  of  the  drawee,  which  he 
orders  or  directs  to  be  delivered  or  paid  over  to  the  payee  or  in- 
dorsee of  the  bill.^  Hence,  where  the  instrument  is  so  written  as 
to  show  that  the  drawer  has  no  right  to  order  the  money  paid,  it  is 
not  a  bill  of  exchange.^  To  determine  this  is,  of  course,  a  question 
purely  of  the  construction  of  the  instrument.  The  point  to  be 
determined  is  whether  the  terms  of  the  instrument,  on  the  one 
hand,  leave  compliance  or  refusal  optional,  or,  on  the  other  hand, 
amount  to  an  imperative  direction.  In  the  former  case  it  is  a  mere 
request  for  a  loan  to  be  given  some  one  else;  in  the  latter  it  is  a 
demand,  with  which  the  drawee  must  in  common  honesty  comply, 
and  amounts  to  the  order  which  is  a  necessary  constituent  of  a  bill 
of  exchange. 

We  may  perhaps  make  this  distinction  more  clear  if  we  show  it 
as  it  is  laid  down  in  the  cases.  Among  the  earliest  ones  on  the  point 
which  illustrate  the  distinction  are  Ruff  v.  Webb  °  and  Little  v. 
Slackford.^°  In  Little  v.  Slackford  Lord  Tenterden  said:  "The  fair 
meaning  of  the  words,  'Please  to  let  the  bearer  have  seven  pounds, 
and  place  it  to  my  account,  and  you  will  oblige  your  humble  servant, 
R.  Slackford,' — was:  'You  will  oblige  me  by  doing  it'"  In  Ruff 
V.  Webb  the  words  were:  "Mr.  B  will  much  oblige  Mr.  A  by  paying 
0  or  order."  In  this  case  the  instrument  was  construed  in  the  light 
of  surrounding  facts.  For  C  was  A's  servant,  and  on  his  discharge 
received  the  instrument  in  question,  directed  to  B,  who  was  (so  it 
was  given  in  evidence)  A's  banker.     It  appeared  also  that  A  paid 

T  For  a  distinction  between  checks  and  bills  of  exchange  see  Morrison  v. 
Bailey,  5  Ohio  St.  13;  Johns.  Cas.  Bills  &  N.  40.  Certificates  of-  deposit  are, 
in  legal  effect,  promissory  notes.  Tiipp  v.  Curtenius,  3G  Mich.  494;  Johns. 
Gas.  Bills  &  N.  3S.  As  holding  a  bank  pass  book  to  be  non-negotiable,  see 
McCaskill  v.  Connecticut  Sav.  Bank,  GO  Conn.  300,  22  Atl.  oGS;  Id.,  Johns. 
Cas.  Bills  &  N.  3o.  Bills  of  lading  are  quasi  negotiable  instruments,  trans- 
ferable by  indorsement  and  delivery.  Shaw  v.  Railroad  Co.,  101  U.  S.  557; 
Jolius.  Cas.  Bills  &  N.  42. 

«  Edw.  Bills  &  N.  §  187;    Chit  Bills,  p.  154;   LufE  v.  Pope,  5  Hill,  413. 

»  Ruff  V.  Webb,  1  Esp.  129,  (before  Lord  Kenyon  in  1794.) 

10  Little  V.  Slackford,  Moody  &  M.  171,  (before  Tenterden,  C.  J.,  in  1828.) 


30  OF    NEGOTIABLE    BILLS    AND    NOTES.  [Ch.    2 

all  his  bills  by  giving  instruments  of  tbis  kind  on  B,  which  B  paid 
when  presented.  C  knew  this.  Lord  Kenyon  said  it  was  a  bill 
of  exchange,  because  it  was  an  order  to  pay  money.  In  other  words, 
in  the  latter  case  it  was  an  order  to  pay  money,  because  the  payment 
of  the  instrument  was  obligatory  upon  B,  who,  in  common  honesty, 
was  bound  to  pay  it;  in  tlie  former,  it  was  a  mere  favor,  because 
there  was  no  duty  resting  upon  the  person  to  whom  the  instrument 
was  addressed."  He  owed  the  signer  nothing.  Nor  does  the  fact 
that  the  order  is  expressed  in  polite  words  impair  its  obligatory 
form.  They  may  seem  a  request,  yet  be  in  fact  an  order.  Indeed, 
the  presumption  is  against  their  being  a  request,  and  the  courts 
generally  seek  to  construe  the  instrument  as  an  order.^''  And,  in 
order  to  displace  the  construction  that  the  instrument  is  a  bill,  it 
would  seem  to  require  that  the  language  necessarily  imported  a 
favor,  and  was  not  meant  as  mere  words  of  civility.^' 

On  the  other  hand,  as  instances  of  instruments  importing  re- 
quests, we  may  refer  to  Hamilton  v.  Spottiswoode,^*  where  the 
words  were:  "We  authorize  you  to  pay  C  or  order."  Here  Baron 
Parke  said:  "Here  is  only  an  option  to  pay  or  not;  therefore  this 
document  is  only  a  warranty  in  case  the  defendant  paid,  and  not  a 
bill  of  exchange."  ^^  And  in  Russell  v.  Powell,^ °  w^here  J  M  as- 
signed to  the  plaintiff  a  share  in  the  estate  of  T  H,  deceased,  in  the 
following  instrument:  "To  the  executors  of  T  H,  deceased — Gents: 
We  do  hereby  authorize  and  require  you  to  pay  to  Mr.  Geo.  Powell, 
or  his  order,  £250,  being  the  amount  directed  by  an  order  of  court 
to  be  paid  to  our  order.    J  M," — it  was  pointed  out  that  the  exec- 

11  See,  also,  Ellison  v.  Collingridge,  9  C.  B.  570. 

In  King  v.  Ellor,  1  Leach,  323,  it  was  held  that  the  terms  of  the  following 
order  did  not  import  any  compulsion  on  the  part  of  the  drawee  to  pay,  but 
was  simply  a  request.  "Please  to  send  £10  by  the  bearer,  as  I  am  so  ill  1 
cannot  wait  upon  you."  An  account,  with  an  order  accompanying,  from  the 
creditor  to  the  debtor  that  the  latter  should  pay  the  account  to  the  agents  of 
the  creditor,  was  held  not  to  be  a  bill.    Norris  v.  Solomon,  2  Moody  &  R.  2G(J. 

12  Story,  Bills  &  N.  §  33;  Wheat! ey  v.  Strobe,  12  CaL  92;  Spurgin  v.  Mc- 
Pheeters,  42  Ind.  527. 

13  Hoyt  V.  Lynch,  2  Sandf.  328. 

14  Hamilton  v.  Spottiswoode,  4  Exch.  200. 

15  King  V.  Ellor,  1  Leach,  323;    Willoughby's  Case,  2  East,  P.  C.  5S2,  930. 
10  14  Mees.  &  W.  418. 


Ch.    2]  ORDER    CONTAINED    IN    BILL.  31 

utors  need  or  need  not  pay  this  sum,  according  to  the  condition  of 
the  estate  in  their  hands,  and  therefore  this  was  not  a  bill  of  ex- 
change. 

The  leaning  of  the  courts  is  to  treat  words  in  an  instrument  re- 
questing payment  as  mandatory,  and  the  instrument  itself  as  a 
bill;^'  but  this  is  not  a  conclusive  presumption.  It  is  rather  a 
prima  facie  one.  The  courts,  where  the  instrument  is  ambiguous, 
will  look  at  the  relation  which  the  drawer  and  acceptor  main- 
tained toward  each  other,  the  objects  they  had  in  view,  as  well 
as  the  scope  and  tenor  of  the  instrument  for  the  purpose  of  ascer- 
taining their  intention.^®  They  will  examine  into  the  circumstan- 
ces under  which  the  instrument  is  given,^"  and  the  situation  of  the 
parties,^"  looking  into  all  antecedent  and  surrounding  facts  to  ascer- 
tain the  meaning  of  the  instrument  itself;  *^  and  if  it  appears  from 
all  these  things  that  it  was  the  intention  of  the  parties  that  the 
drawee  should  be  primarily  liable,  and  liable  upon  the  instrument 
at  all  events,  then  the  words,  whatever  they  may  be,  will  be  con- 
strued as  an  order,  and  importing  an  obligation;    otherwise  they 

IT  Ellison  V.  Collingridge,  supra. 

IS  Van  Wagner  v.  TeiTett,  27  Barb.  181,  at  page  186;  Green  r.  Eldred,  66 
N.  Y.  611;  Maxon  v.  Maxon,  16  N.  Y.  St.  Rep.  74;  Bridger  v.  Pierson,  45  N. 
Y.  601.  In  an  action  on  an  ambiguous  instrument  Bay  ley,  J.,  said:  "I  think 
also  that  where  a  party  frames  his  insti-ument  in  such  a  way  that  it  is  am- 
biguous, whether  it  be  a  bill  of  exchange  or  a  promissory  note,  the  party 
holding  it  is  entitled  to  treat  it  as  either  one  or  the  other,  and  that  the  plain- 
tiff ought  not  to  be  defeated  by  the  party  who  framed  the  instrument  being 
allowed  to  say  that  it  is  a  bill  of  exchange."  Edis  v.  Bury,  6  Barn.  &  C.  433. 
To  the  same  effect,  see  Lloyd  v.  Oliver,  in  which,  in  reference  to  the  instru- 
ment in  question,  it  is  said  that:  "It  is  not  unjust  to  presume  that  it  was 
drawn  in  this  form  for  the  purpose  of  suing  upon  it,  either  as  a  promissory 
note  or  as  a  bill  of  exchange."  18  Q.  B.  471.  See,  also,  a  similar  opinion  in 
Com.  V.  Butterick,  100  Mass.  12.  In  the  case  of  Miller  v.  Thompson,  it  was 
held  that,  since  the  instrument  sued  on  was  without  distinct  parties  as  draw- 
er and  drawee,  these  being  essentials  of  a  bill  of  exchange,  it  should,  as  the 
only  alternative,  be  declared  on  as  a  promissory  note.    3  Man.  &  G.  576. 

19  De  Lavallette  v.  Wendt,  75  N.  Y.  579;  Kenyon  v.  Knights  Templar  &  Ma- 
sonic Mut.  Aid  Ass'n.  122  N.  Y.  247,  25  N.  E.  299;  White  v.  Hoyt,  73  N.  Y. 
ri05,  at  page  512. 

20  Field  V.  Munson,  47  N.  Y.  221;  Pitney  v.  Glens  Falls  Ins.  (Do.,  65  N.  Y., 
at  pages  16-18;    Patten  v.  I'ancoast,  1U9  N.  Y.  625,  15  N.  E.  893. 

21  Blossom  V.  Griffin,  13  N.  Y.  5G9. 


32  OF    NEGOTIABLE    BILLS    AND    NOTES.  [Ch.   2 

operate  at  most  only  as  an  assignment  to  the  payee,  and  the  instru- 
ment is  not  a  draft  or  bill  of  exclian<re.** 


PROMISE  CONTAINED  IN  NOTE. 

16.  A  promise  means  any  form  of  'words  from  -which  an 
intent  of  the  maker  to  pay  can  be  construed. 

A  mere  admission  that  a  debt  is  due,  which  can  be  treated  on  a 
trial  only  as  so  much  proof  tending  to  establish  a  debt,  is  a  very 
different  thing  from  the  promise  required  for  a  negotiable  promis- 
sory note.  A  promissory  note  is  a  new  obligation,  and  not  simply 
evidence  of  an  old  obligation.  An  acknowledgment  of  indebted- 
ness is  evidence  of  an  old  obligation,  but  creates  iio  new  obligation.^^ 
In  such  terms  as  "Due  C,  $100,  value  received;"  "I  O  U  $100;"  =*  "1 
acknowledge  the  wathin  note  to  be  just  and  due."  ^° — there  is  no  lia- 
bility that  is  new,  assumed  by  the  persons  who  signed  these  instru- 
ments. They  are  mere  memoranda  relating  to  a  financial  transac- 
tion, without  any  implication  in  words  of  a  promise  to  pay. 

The  courts  go  to  the  extreme  limit  to  support  a  note  in  finding 
a  promise  to  pay.  Thus,  in  the  words,  "I  do  acknowledge  myself 
to  be  indebted  to  A  in  £50,  to  be  paid  on,  demand,"  ^®  the  words  "to 
be  paid"  were  deemed  a  promise  to  pay;  and  the  words,  "I  O  U,  to 
be  paid  on  the  20th  inst,"  were  held  a  promissory  note  for  a  similar 
reason."     So  the  words  "John  Mason,  14th  Feb.,  183G,  borrowed  of 

2  2  Duffield  V.  Johnston,  OG  N.  Y.  369. 

23  In  the  case  of  Hyne  v.  Dewduej-,  which  was  for  money  lent,  It  was  held 
that  "time  of  payment  should  be  mentioned  in  a  note,  and  that  an  instrument 
lacking  such  mention  of  time  was  nothing  more  than  an  acknowledgment 
that  the  money  had  been  paid.  21  Law  J.  Q.  B.  278.  To  the  same  effect,  see 
Taylor  v.  Steele,  infra.  By  a  very  recent  decision  in  New  York  the  court  of 
appeals  has  repudiated  this  doctrine,  and  held  that  an  acknowledgment  of  in- 
debtedness implies  a  promise  to  pay.  Hegeman  v.  Moon,  131  N.  Y.  4G2,  30  N. 
E.  487. 

24  Currier  v.  Lockwood,  40  Conn.  349. 
2  8  Gray  V.  Bowden,  23  Pick.  2S2. 

26  Casborne  v.  Button,  Selw.  N.  P.  329. 

87  Brooks  V.  Elkins,  2  Mees.  &  W.  74.  This  case  was  held  not  to  be  one  of 
an  ordinary  I  O  U,  which  is  a  bare  admission  of  debt,  but,  since  it  contains 


Ch.   2]  PROMISE    CONTAINED    IN    NOTE.  33 

Mary,  his  sister,  the  sum  of  £14  in  cash,  as  per  loan,  in  promise  of 
payment  of  which  I  am  truly  thankful  for,"  were  held  to  constitute 
a  promise, ^^  because  they  expressly  stated  an  advance  of  a  loan  of 
money,  which  the  court  thought  was  impliedly  undertaken  to  be 
paid  for.  The  expressions  of  gratitude  were  in  this  case  treated 
as  mere  redundancy.  In  the  expression:  "Good  to  C  or  order,"  ^^ 
the  words  of  negotiability  amounted  to  a  promise  to  be  good  not 
only  to  C,  but  also  to  whom  he  might  direct;  hence  a  general  prom- 
ise. So,  also,  the  expression,  "Due  A,  on  demand,"  because  the 
words  "on  demand"  can  only  be  of  meaning  with  the  words  "to  be 
paid"  inserted.^"  In  Arkansas  and  Illinois  there  are,  it  is  true, 
decisions  holding  that  the  word  "due"  imports  such  a  promise;** 
and  in  some  jurisdictions  other  than  these  a  duebill  is  also  treated 
as  a  promissory  note.  But  this  is  against  the  weight  of  authority, 
and  doubtful  law.  The  true  question  before  the  court  in  construc- 
tion should  be  the  intention  of  the  signer,  to  be  gathered  from  any 
form  of  words  in  the  instrument  itself,  to  assume  and  pay  as  a  dis- 
tinctly new  obligation.^  2 

an  express  promise  to  pay  on  a  day  certain,  It  is  a  promissory  note.  See,  also, 
Morris  v.  Lee,  1  Strange,  629. 

2  8  Ellis  V.  Mason,  7  Dowl.  598. 

29  Franklin  v.  March.  6  N.  H.  3fi4. 

30  Smith  V.  Allen,  5  Day,  337.  In  this  case,  which  was  an  action  of  as- 
sumpsit on  the  following  instrument:  "Due  John  Allen  94  dollars,  91  cents, 
on  demand,"— it  was  held  that  the  words  "on  demand,"  following  an  acknowl- 
edgment of  debt,  and  signed  by  the  debtor,  import  such  a  promise  to  pay  as 
to  constitute  the  writing  a  note.    See  Russell  v.  Whipple,  2  Cow.  53G. 

31  Jacquin  v.  Warren,  40  111.  459;  Anderson  v.  Pearce,  36  Ark.  293;  St 
Louis,  I.  &  M.  S.  Ry.  Co.  v.  Camden  Bank,  47  Ark.  545,  1  S.  W.  704;  Brady 
V.  Chandler,  31  Mo.  28;    Lee  v.  Balcom,  9  Colo.  216,  11  Pac.  74. 

3  2  In  the  case  of  Block  v.  Bell  it  was  held  by  Lord  Lyndhurst  that  an  in- 
strument in  this  language:  "On  demand,  I  promise  to  pay  A.  B.  or  bearer, 
the  sum  of  £15,  for  value  received,"— constituted  a  promissory  note.  1  Moody 
&  R.  149.  In  the  case  of  Taylor  v.  Steele  an  action  was  brought  on  the  fol- 
lowing instrument:  "Received  from  Mrs.  Barbara  Taylor  the  sum  of  £170, 
for  value  received,  for  which  I  promise  to  pay  at  the  rate  of  £5  per  cent, 
from  the  above  date."  The  following  opinion  was  delivered  by  the  court: 
"This  document  is  not  a  promissory  note,  because  it  contains  no  promise  to 
pay  the  principal,  but  only  the  interest.  *  *  *  I  agree  that  an  actual  prom- 
ise is  not  necessary  if  there  are  words  in  the  instrument  from  which  a  prom- 
ise to  pay  can  be  collected."    16  Mees.  &  W.  (1847)  665.    To  the  same  effect, 

NEG.  BILLS 3 


34  OF    NEGOTIABLE    BILLS    AND    NOTES.  [Ch.   2 

V  A  consideration  of  the  decisions  from  which  the  foregoing  in- 
stances are  talcen  will  clearly  outline  the  theory  that  I  O  U's  or 
acknowledgments  of  indebtedness  cannot  be  made  the  foundations 
of  commercial  instruments.  They  can  only  be  classified  in  law  as 
admissions,  and  have  weight  as  evidence.^ ^  In  order  to  entitle  the 
instrument  to  be  ranked  as  a  negotiable  note,  it  must  be  in  itself  o 
distinctly  transferable  contract  right  or  a  promise  to  pay.  The  ad- 
mission of  indebtednes  could,  even  if  construed  to  its  utmost  effect, 
be  only  treated  as  a  right  which  was  open  to  every  defense  or  set-off, 
and  from  their  very  nature,  evidences  of  indebtedness  could  not  be 
negotiable. 


CERTAINTY  AS  TO  THE  TERMS  OF  THE  ORDER  OR 

PROMISE. 

17.  A  negotiable  bill  or  note  must  not  be  payable  upon 
a  contingency,  nor  at  an  uncertain  time, — but  must  be 
payable  absolutely  and  at  a  time  certain. 

EXCEPTIONS— (a)  The  negotiable  instrument  is  sub- 
ject to  the  implied  conditions  of  presentment, 
and  notice  of  dishonor, 
(b)  If  the  event  is  certain  to  happen,  but  uncertain 
only  in  regard  to  time,  or  if  it  is  expressed  as 
being  payable  at  a  time  certain  to  transpire,  but 


see  Russell  v.  Whipple,  2  Cow.  536.  In  Forward  v.  Thompson  It  is  held  tliat 
a  bill  must  have  a  drawee,  and  that,  to  constitute  a  note,  the  instrument 
must  have  a  promise  in  terms  by  the  maker.  12  U.  C.  Q.  B.  103.  A  certifi- 
cate of  deposit  payable  to  order  after  a  certain  time,  with  interest,  has  been 
held  to  be  a  negotiable  promissoiy  note.  Bank  of  Orleans  v.  Merrill,  2  Hill, 
295.  In  an  action  of  assumpsit  on  the  following  instrument:  "Due  A.  &  B. 
$17.14.  Value  received.  X.  Y.,"— the  docti'ine  laid  down  in  Smith  v.  Allen, 
supra,  was  followed,  and  it  was  held  that  the  words  "value  received."  were 
not  equivalent  to  "on  demand,"  and  that,  to  constitute  an  instrument  a  prom- 
issory note,  there  must  be  an  express  promise  distinct  from  an  implied.  Cur- 
rier V.  Lock  wood,  40  Conn.  349. 

3  3  According  to  some  courts,  the  effect  of  such  phrase  Is  simply  to  evi- 
dence a  debt,  and  not  to  constitute  a  promissoi-y  note  or  receipt.  Fisher  v. 
Leslie.  1   Esp.  42G. 


Oh.   2]       CERTAINTY    AS    TO    THE   TERMS   OF   THE   ORDER   OR   PROMISE.       35 

is  said  to  be  payable  on  or  before  that  time,'*  or 
is  expressed  to  be  payable  in  effect  in  a  reason- 
able time,  the  instrument  is  negotiable. 

18.  The  instrument  must  not  be  payable  out  of  any  par- 
ticular fund. 

DISTINCTION — Indicating  to  a  drawee  a  source  or 
fund  -where  he  may  be  reimbursed  is  not  char- 
ging payment  upon  a  particular  fund. 

19.  A  negotiable  instrument  may  contain  an  additional 
condition  or  agreement,  ■which  is  not  of  the  essence  of  the 
order  or  promise,  but  rather  an  incident  or  addition  to  it. 

20.  A  negotiable  instrument  may  give  the  holder  an 
option  bet\\reen  payment  of  money  and  some  other  thing- 

21.  The  following  are  absolute  promises  to  pay  money, 
and  are  negotiable  instruments: 

Instruments  payable 

(a)  On  demand,  or 

(b)  At  sight,  or  on  a  fixed  period  after  sight  or  one  in 

which  no  time  is  expressed,  w^hich  is  equivalent 
to  an  instrument  payable  on  demand. 

22.  An  instrument  payable  in  installments,  even  though 
it  provides  that  upon  non-payment  of  an  installment  the 
whole  becomes  due,  is  a  negotiable  instrument. 

Certainty  in  General. 

Our  purpose  here  is  to  explain  why  a  negotiable  instrument  can- 
not be  conditional  in  its  terms,  and  why  it  must  be  absolute  upon  its 
face,  and  founded  upon  the  entire  credit  of  the  parties.'" 

34  A  promissory  note  payable  "on  or  before"  a  day  named  is  certain  as  to 
time,  and  is  negotiable.  Mattison  v.  Marks,  31  Mich.  421;  Johns.  Cas. 
Bills  &  N.  22. 

3  5  It  is  a  necessary  quality  of  negotiable  paper  that  it  should  be  simple, 
certain,  unconditional,  and  not  subject  to  any  contingencies.  Citizens'  Nat, 
Bank  v.  Piollet,  126  Pa.  St.  194.  17  Atl.  G03;  .Johns.  Cas.  Bills  &  N.  18.  To 
the  same  effect  see  Smith  v.  Boheme,  Gilb.  Ch.  93.  In  the  case  of  Josselyn 
V.  Lacier,  which  was  an  action  upcn  a  bill  or  written  request  to  pay  "out 
of  the  growing  substance"  of  the  d'awer,  it  was  held  that  such  instrument 


36  OF    NEGOTIABLE    BILLS    AND    NOTES.  [Ch.   2 

Generally  speaking,  certainty  is  one  of  the  first  essentials  to  a 
circulating  medium.  If  conditions  written  upon  the  face  of  nego- 
tiable instruments  were  to  be  permitted,  then  eyery  holder  who  dis- 
counted them  would  necessarily  be  charged  with  notice  of  the  facts 
on  the  face  of  the  instrument.  And  to  be  in  a  position  to  assert  his 
equities,  eyery  holder  would  further  be  bound  to  show  that  he  had 
used  all  diligence  to  ascertain  whether  the  condition  had  been  ful- 
filled, or  the  eyent  had  happened.  This  would  as  much  necessitate 
eyery  holder  procuring  a  written  estoppel  on  transfer,  as  it  does 
necessitate  it  when  a  person  buys  a  mortgage.  And,  the  yery  es- 
sence of  business  paper  being  the  short  terms  of  credit,  to  allow 
such  an  ingredient  in  the  theory  of  negotiability  would  be  an  ab- 
surdity. 

In  the  leading  case  of  Gibson  v.  Minet,^®  the  theory  is  explained 
thus:  "The  title  of  a  bearer  is  self-eyident.  The  title  of  an  indorsee 
appears  by  the  indorsement  itself.  Eyerything  which  is  necessary 
to  be  known  in  order  that  it  may  be  seen  whether  a  writing  is  a 
bill  of  exchange,  and  as  such,  by  the  custom  of  merchants,  partakes 
of  the  nature  of  a  specialty,  and  creates  a  debt  or  duty  by  its  own 
proper  force,  appears  at  once  by  inspection  of  the  writing.  The 
wit  of  man  cannot  deyise  anything  better  calculated  for  circulation. 
The  yalue  of  the  writing,  the  assignable  quality  of  it,  the  particular 

was  not  a  promissory  note,  since  it  was  not  ne.gotiable,  by  reason  of  its  be- 
ing payable  upon  a  contingency  "out  of  the  gi-owing  substance."  10  Mod. 
294,  31G.  A  note  payable  to  A.  or  order  "on  demand,  on  the  return  of  this 
certificate,  and  my  guarantee  of  his  note  to  his  brother,"  was  held  not  to  be 
good,  as  its  payment  depended  upon  the  happening  of  a  contingency. 
Smilie  v.  Stevens,  39  Vt.  315.  In  Alexander  v.  Thomas  an  order  to  pay 
"90  days  after  sight,  or  when  realized,"  etc.  (meaning  when  In  funds  for 
the  purpose),  was  held  to  be  dependent  on  a  contingency  which  might  never 
happen,  and  therefore  not  a  good  bill.  16  Q.  B.  333.  A  promise  to  pay  "in 
V/2  yrs.  or  sooner,  at  the  option  of  the  mortgagor,  •  *  *  with  interest  to 
be  paid  during  said  term  and  for  such  further  time  as  said  principal  sum 
or  any  part  thereof  shall  remain  unpaid,"  was  held  not  to  be  a  good  note, 
by  reason  of  its  not  being  a  promise  to  pay  a  fixed  sum  of  money  at  a  definite 
time.  Stults  v.  Silva,  119  Mass.  137.  See,  also,  Way  v.  Smith,  111  Mass.  523; 
Sloan  v.  McCarty,  134  Mass.  245;  Baird  v.  Underwood,  74  111.  176;  Meyers 
V.  Phillips,  72  111.  4G0;  Smentek  v.  Coonhauser,  17  111.  App.  266;  Fleury  v. 
Tufts,  25  111.  App.  101, 
36  1  H.  Bl.  618. 


Ch.   2]       CERTAINTY   AS   TO   THE   TERMS   OF   THE    ORDER    OR    PROMISE.       37 

mode  of  assigning  it,  are  created  and  determined  in  the  original 
frame  and  constitution  of  tlic  iiist}Miment  itself;  and  the  party  to 
whom  the  hill  of  exchange  is  tendered  has  only  to  read  it,  need  look 
no  further,  and  has  nothing  to  do  with  any  private  history  that 
may  belong  to  it.  The  policy  which  instituted  this  simple  instru- 
ment demands  that  the  simplicity  of  it  should  be  protected,  and 
that  it  should  never  be  entangled  in  the  infinitely  complicated  trans- 
actions of  particular  individuals  into  whose  hands  it  may  come/' 

Illustration  of  Uncertainty  as  to  Event. 

Some  of  the  instances  of  this  rule,  commonly  cited,  and  important 
to  mention  because  of  the  distinction  which  is  drawn  with  regard  to 
them,  are  that  class  of  orders  and  promises  where  it  is  uncertain  from 
the  inspection  of  the  instrument  that  the  day  or  event  of  payment 
is  ever  to  arrive.  The  case  of  Beardesley  v.  Baldwin  ^Ms  an  example. 
That  was  a  promise  to  pay  money  "so  many  days  after  the  defend- 
ant should  marry."  This  is  briefly  reported  as  not  being  negotia- 
ble within  the  statute.  Another  instance  is  Braham  v.  Bubb,^^ 
which  was  a  promise  to  pay  "four  years  after  date,  if  I  am  then  liv- 
ing." Abbott,  C.  J.,  said:  "It  is  contingent  whether  the  note  will 
ever  be  payable,  for,  if  the  maker  should  die  within  the  four  years, 
no  payment  is  to  be  made."  ^^  These  will  perhaps  suffice  to  illus- 
trate the  point  that  such  instruments  contain  a  promise  so  indefi- 
nite that,  for  business  purposes,  it  hardly  amounts  to  a  promise 
at  all.*"     It  can  certainly  have  no  definite  value.     Hence  the  rea- 

87  2  strange,  1151. 

88  MS.  Trin.  Term,  1826,  Middlesex  (cited  in  Chitty,  Bills,  *13.'i,  note). 

39  Richardson  v.  Martyr,  25  Law  T.  64;  De  Wald's  Estate,  13  Phila.  (Pa.) 
251. 

40  In  Richardson  v.  Martyr  it  was  held  that  where  demand  on  a  note 
must  be  made  during  the  lifetime  of  the  payee,  the  undertaking  was  condi- 
tional, and  did  not,  therefore,  constitute  a  promissory  note.  25  Law  T.  G-1. 
Where  a  note  was  given  on  a  condition  that,  should  a  dispute  arise  between 
certain  parties  about  the  subject  for  which  the  note  was  given,  said  note 
should  be  void,  it  was  held  that  the  instrument  was  not  negotiable,  since 
the  party  taking  was  compelled  to  inquire  as  to  an  extrinsic  fact,  and  there- 
fore took  only  a  contingent  benefit.  Hartley  v.  Wilkinson,  4  Maule  &  S. 
25.  Where  a  written  promise  was  given  to  pay  for  goods  ordered  and  to 
be  supplied  subsequently,  it  was  held  that,  since  its  consideration  was  not 
executed,  such  pi-omise  was  not  a  promissory  note,  but  merely  a  guaranty. 


38  OF    NEGOTIABLE    BILLS  AND    NOTES.  [Ch.   2 

SOD  of  the  rule  that  such  instruments  are  non-negotiable,  because 
uncertain.  It  would  be  unwise,  from  a  business  point  of  view,  to 
allow  such  conditions  to  be  incorporated  in  instruments  for  which 
the  courts  proposed  to  formulate  rules  as  a  circulating  medium.*^ 

Certainty  as  to  Event,  Uncertainty  as  to  Time. 

The  rule  laid  down  by  the  courts  that  no  order  or  promise  from 
the  terms  of  which  it  was  manifestly  uncertain  that  the  money 
will  ever  be  paid  can  be  a  negotiable  instrument,  was  undoubtedly 
wise.  As  much  cannot  be  said  for  the  rule  laid  down  in  contradis- 
tinction to  it,  in  another  aspect  of  this  same  point.     Where  the  time 

Jarvis  V.  Wilkins,  7  Mees.  &  W.  410.  In  an  action  on  a  note  given  "in  consider- 
ation of  foregoing  and  forbearing  an  action  at  law  *  *  *  for  damages  ascer- 
tained •  ♦  *,"  it  was  held  that,  as  something  had  been  done  for  which 
damages  had  been  ascertained,  and  as  there  was  an  executed  considera- 
tion, the  note  was  payable,  being  a  distinct  promise.  Shenton  v.  James,  5 
Q.  B.  199.  A  written  promise  to  pay  a  certain  amoimt  of  money  as  soon 
as  K.  shall  come  of  age  was  held  not  to  constitute  a  promissory  note,  and 
this,  too,  regardless  of  the  fact  that  K.  did  in  fact  attain  his  majority. 
Kelley  v.  Hemmingway,  13  111.  604.  In  an  action  upon  an  order  payable 
if  terms  mentioned  in  letters  of  the  drawer  should  be  complied  with,  It 
was  held  that  there  could  be  no  recovery,  although  by  the  acceptance  a 
compliance  was  admitted.  The  writing  was  not  a  bill  when  drawn,  by 
reason  of  the  contingency,  and  could  not  subsequently  become  £0.  Kingston 
V.  Long,  4  Doug.  9,  Bayley,  Bills  (6th  Ed.)  16.  In  Appleby  v.  Biddolph— an 
action  on  a  note  in  these  words:  "I  promise  to  pay  *  *  *  if  my  brother 
doth  not  pay  it  within  such  a  time"— judgment  was  arrested  after  verdict 
on  the  ground  that  the  drawer  might  be  the  debtor  only  upon  a  contin- 
gency. Cited  in  8  Mod.  363.  A  stipulation  to  pay  attorney's  fees  in  case 
of  a  suit  upon  a  negotiable  instrument  does  not  destroy  its  negotiability. 
Dorsey  v.  Wolff,  142  111.  589,  32  N.  E.  495;  Id.,  Johns.  Cas.  Bills  &  N.  23; 
Brooks  V.  Hargreaves,  21  Mich.  254;  Fralick  v.  Norton,  2  Mich.  130;  First 
Nat.  Bank  of  Port  Huron  v.  Carson.  60  Mich.  432,  27  N.  W.  589;  Citizens' 
Nat.  Bank  v.  Piollet  (Pa.  Sup.)  17  Atl.  603;  Goodwin  v.  Goodwin,  65  ID. 
497;  Gillilan  v.  Myers,  31  111.  525;  Kingsbury  v.  Wall,  68  111.  311;  Miller 
V.  Excelsior  Stone  Co.,  1  111.  App.  273;  Hubbard  v.  Moseley,  11  Gray, 
(Mass.)  170;  Costelo  v.  Crowell.  127  Mass.  293. 

41  Corbett  v.  State,  24  Ga.  287;  Husband  v.  Epling,  81  111.  172;  Pearson 
V.  Garrett,  4  Mod.  242;  Palmer  v.  Pratt,  2  Bing.  185;  Coolidge  v.  Ruggles, 
15  Mass.  387;  De  Forest  v.  Frary,  6  Cow.  151;  Grant  v.  Wood,  12  Gray, 
220;  Sloan  v.  McCarty,  134  Mass.  245;  Brooks  v.  Hargreaves,  21  Mich. 
255. 


Ch.  2]   CERTAINTY  AS  TO  THE  TERMS  OF  THE  ORDER  OR  PROMISE.   39 

of  pajment  was  certain  to  arrive  the  courts  considered  the  element 
of  uncertainty  which  destroyed  negotiability,  eliminated,  and  the 
instrument  was  treated  as  an  unconditional  promise  for  the  pay- 
ment of  money.*^  This  rule  originated  in  two  cases,  followed  in 
other  jurisdictions,  but  probably  overruled  in  .England,  the  juris- 
diction of  their  origin.  These  cases  are  Andrews  v.  Franklin  *"  and 
Colehan  v.  Cooke.**  The  instrument  in  Andrews  v.  Franklin  was 
a  promise  to  pay  within  two  months  after  a  certain  public  ship  was 
paid  off,  and  was  held  to  be  negotiable  because  the  paying  off  a 
public  ship  is  a  thing  of  a  public  nature,  and  certain  to  arrive.  In 
Colehan  v.  Cooke  the  instrument  was  a  promise  to  pay  ten  days 
after  the  death  of  the  maker's  father, — an  event  also  certain  to 
arrive.  In  this  last  case  Lord  Chief  Justice  Willes  said:  "A  note, 
to  be  within  the  statute  of  Anne,  need  be  only  an  express  prom- 
ise to  pay  to  another  or  to  bearer,  but  as  to  payment  the  act  is 
silent;  that  there  was  no  limited  time  beyond  which  if  bills  of  ex- 
change were  made  payable  they  were  not  good;  and  that  if  a  bill 
of  exchange  be  made  payable  at  never  so  distant  a  day,  if  it  be  a 
day  that  must  come,  it  was  no  objection  to  the  bill."  This  is  prob- 
ably the  doctrine  of  the  present  day.  Says  Judge  Pierpoint  in  Capron 
V.  Capron:  *"  "As  long  as  the  payment  is  certain,  and  the  uncertainty 
is  only  as  to  the  length  of  time  to  be  given,  this  uncertainty  the 
law  makes  certain  by  giving  a  reasonable  time  after  the  time  pre- 
scribed to  make  payment."  This  decision  was  rendered  upon  a  note 
in  terms:  "I  promise  to  pay  A  B,  or  bearer,  $75,  one  year  from 
date,  with  interest  annually;  and,  if  there  is  not  enough  realized 
by  good  management  in  one  year,  to  have  more  time  to  pay."    So 

*2  Walker  v.  Roberts,  Car,  &  M.  590.  But  see  Stewart  v.  Fullarton,  Mor. 
Diet.  1408. 

«» 1  Strange,  24. 

**  Willes,  393.  This  was  upon  a  note  payable  ten  days  after  the  death 
of  the  maker's  father,  which  note  was  held  good,  as  it  was  certain  to  fall 
due  at  some  time. 

4B44  vt.  412.  In  the  case  of  Smithers  v.  Junker,  it  was  held  that  a  note 
made  payable  at  the  convenience  of  the  maker,  in  the  following  language^ 
"For  value  received,  I  promise  to  pay  to  S.  P.  S.  $2,048.25,  payable  at  my 
convenience,  upon  this  express  condition:  that  I  am  to  be  the  sole  judge 
of  such  convenience  and  time  of  payment,"  is  payable  within  a  reasonable 
time.     41  Fed.  101;    Johns.  Cas.  Bills  &  N.  21. 


40  OF    NEGOTIABLE    BILLS    AND    NOTES.  [Ch.   2 

in  Cofa  v.  Buck,*"  a  note  to  be  paid  "in  the  course  of  the  season 
now  coming"  was  negotiable  because  the  date  of  payment  must  come 
by  mere  lapse  of  time.*^  Professor  Ames  makes  a  most  apposite 
criticism  of  the  foregoing  rule.  "Nothing,"  says  he,  "could  be  more 
inconsistent  with  the  negotiability  of  a  bill  or  note  than  that  the 
holder  should  have  to  be  continually  on  the  alert  to  ascertain  the 
precise  day  when  they  should  become  payable,  in  order  to  charge  the 
drawer  or  indorser.  It  is  impossible  to  attach  a  definite  value  to 
anything  so  speculative  in  its  nature  as  an  obligation  payable  so 
many  days  after  the  death  of  the  maker."  ** 

Payment  out  of  Particular  Fund. 

There  is  another  class  of  common  business  instruments  which  the 
courts  have  deemed  obnoxious  to  the  rules  necessary  to  protect  the 
theory  of  negotiability  because  they  are  not  absolute  orders  or 
promises.  They  are  those  where  a  person,  for  value,  has  sought 
to  transfer  some  particular  property  or  right  in  an  instrument  which 
has  much  the  form  of  a  bill  or  note.  They  empower  the  payee  to 
collect  moneys  of  the  drawer  or  maker  which  are  coming  from 
some  particular  source.  They  are  not  orders  or  promises  to  pay  in 
any  event.  Thus  in  Jenney  v.  Herle*®  the  court  said:  "It  would 
be  very  mischievous  if  a  tradesman  applies  to  a  gentleman  for 
money  for  his  bill.  Says  the  gentleman,  'I  will  direct  my  stew- 
ard to  pay  you,'  and  writes  to  him,  'Pay  to  J.  S.  the  money  men- 
tioned in  this  bill  out  of  the  rents  in  your  hands.'  The  steward  has 
no  rents  in  his  hands.     It  can  never  be  imagined  the  gentleman 

«8  7  Mete,  (Mass.)  5S8. 

47  Works  V.  Hershey,  35  Iowa,  340;  Goodloe  v.  Taylor,  3  Hawks,  458;  Kis- 
kadden  v.  Allen,  7  Colo.  206,  3  Pac.  221;  Mattison  v.  Marks,  31  Micb.  421; 
First  Nat.  Bank  v.  Skeen,  29  Mo.  App.  119;  Ernst  v.  Steckman,  74  Pa.  St. 
13;  Walker  v.  Woollen,  54  Ind.  1G4.  In  the  case  of  Jordan  v.  Tate,  it  was 
held  that  "the  negotiable  character  of  a  promissory  note  is  not  affected  by 
the  fact  that  it  was  made  payable,  by  its  terms,  on  or  before  a  future  day 
therein  named."    19  Ohio  St.  586. 

4  8  Alexander  v.  Thomas,  16  Q.  B.  333;   Stults  v.  Silva,  119  Mass.  137. 

49  2  Ld.  Raym.  1361,  and  see  Dawkes  v.  Lord  De  Lorane,  3  Wils.  207,  2 
W.  Bl.  782;  Carlos  v.  Fancourt,  5  Term  R.  482;  Griffin  v.  Weatherby,  L.  R. 
3  Q.  B.  753;  Morton  v.  Naylor,  1  Hill,  583;  Gallery  v.  Prindle,  14  Barb.  186; 
Wadlington  v.  Covert,  51  Miss.  631;  Bayerque  v.  City  of  San  Francisco,  1 
McAll.  175,  Fed.  Cas.  No.  1,137. 


Ch.    2]       CERTAINTY    AS    TO   THE   TERMS   OP   THE   ORDER    OR    PROMISE.       41 

should  be  liable  to  be  sued  upon  this  as  upon  a  bill  of  exchange." 
And  the  court  accordingly  refused  to  consider  the  instrument  be- 
fore them  a  bill  of  exchange,  and  considered  it  a  "bare  appointment 
to  pa  J  money  out  of  a  partiC'lar  fund."  The  modern  doctrine  is  the 
same.  In  Munger  v.  Shannon  ^°  the  question  was  concerning  this 
instrument:  "Mr.  Shannon:  You  will  please  pay  to  W.  &  H.  the 
amount  of  |2,000,  and  deduct  the  same  from  my  share  of  profits 
of  our  partnership."  This  was  formally  accepted.  Dwight,  C,  said 
of  this:  ''^  "A  bill  must  be  drawn  on  the  general  credit  of  the  drawer, 
though  it  is  no  objection,  when  so  drawn,  that  a  particular  fund 
is  specified  from  which  the  drawee  is  reimbursed.  The  true  test 
is  whether  the  drawee  is  confined  to  the  particular  fund,  or  whether, 
though  a  particular  fund  is  mentioned,  the  drawee  may  charge  the 
bill  up  to  the  general  account  of  the  drawer  if  the  designated  fund 
turn  out  to  be  insufficient.  It  must  appear  that  the  bill  of  ex- 
change is  drawn  on  the  general  credit  of  the  drawer.^^  It  must 
cany  with  it  the  personal  credit  of  the  drawer,  not  confined  to  any 
fund.  It  is  upon  the  credit  of  a  person's  hand  as  on  the  hand  of  the 
drawer,  the  indorser,  or  the  person  who  negotiates  it."  Instances  of 
the  above  principle  are  an  order  of  A  upon  B  to  pay  a  certain  sum 
in  the  words  "on  account  of  brick  work  done,"  °^  or  "out  of  money 
in  his  hands  belonging  to  me,"  "*  or  when  the  paper  was  expressed 
as  payable  "for  value  received  in  stock  ale  brewing  vessels,"  ^°  or 
"out  of  the  rents,"  ^^  or  "out  of  growing  substance,"  "  or  "out  of 
the  net  proceeds  of  certain  ore,"  ^^  or  "out  of  a  certain  claim."  °® 

60  61  N.  Y.  251. 
Bi  61  N.  Y.  255. 

62  Dawkes  v.  Lord  De  Lorane,  3  Wils.  213;  Josselyn  v.  Lacier,  10  Mod.  291. 

63  Pitman  v.  Breekenridge,  3  Grat.  127. 

64  Aveiett  V.  Booker,  15  Grat.  165. 

66  Clarke  v.  Percival,  2  Barn.  &  Add.  6G0. 

66  1  Pars.  Bills  &  N.  43. 

67  Josselyn  v.  Lacier,  supra. 

68  Thus  it  was  held  that  a  written  promise  to  pay  a  certain  amount  at  a 
time  agreed  upon,  the  means  of  payment  to  be  derived  from  ores  which  were 
to  be  dug  subsequent  to  the  promise,  did  not  comply  with  the  requisites  of  a 
promissory  note.    There  is  in  such  an  agreement  a  want  of  that  certainty 


59  Brill  T.  TutUe,  81  N.  Y.  457;    Ehrichs  v.  De  Mill,  75  N.  Y.  371,  and  list 
of  authorities  collated,  1  Ames,  Bills  Sc  N.,  note  p.  29. 


42  OF    NEGOTIABLE    BILLS    AND    NOTES.  [Ch.   2 

Thus  a  negotiable  instrument  must  be  guarantied  by  the  whole  credit 
of  the  parties.  It  is  to  be  their  note  of  hand.  It  must  be  their 
promise  to  pay  absolutely  and  at  all  events.""  The  instruments  we 
have  mentioned  would  be  effectuated,  but  they  would  be  effectu- 
ated as  equitable  assignments,  and  not  as  negotiable  instruments. 
It  would  be  the  mere  transfer  of  a  single  right,  and  not  an  instru- 
ment fitted  to  circulate  as  a  medium  based  upon  the  entire  credit 
of  all  the  parties. 

The  mere  fact,  however,  that  a  particular  fund  is  referred  to  in 
an  instrument  does  not  make  the  instrument  payable  out  of  it 
There  is  a  wide  difference  between  instruments  drawn  payable  out 
of  a  particular  fund  and  instruments  that  are  chargeable  to  a  par- 
ticular acciunt.  The  former,  as  has  been  said,  is  a  mere  equitable 
assignment  pro  tanto  of  the  fund  mentioned  in  it.'^  And  the  drawee, 
when  he  has  had  notice  of  the  delivery  of  the  assignment  order 
to  the  payee,  is  bound  to  apply  the  fund,  as  it  accrues,  to  the  pay- 
ment of  the  order,  and  to  no  other  purpose.  But  if  an  order  be 
made  generally  upon  the  drawee  to  be  paid  by  him  in  the  first  in- 
stance on  the  credit  of  the  drawer  and  without  regard  to  the  source 
from  which  the  money  used  for  its  payment  is  obtained,  the  des- 
ignation by  the  drawer  of  a  particular  fund  out  of  which  the  drawee 
is  to  subsequently  reimburse  himself  for  such  payment  or  a  par- 
ticular account  to  which  it  is  to  be  charged  will  not  convert  the 
order  into  an  assignment  of  the  fund."*  It  must  appear  in  the 
order,  to  have  that  effect.  And  it  must  contain  either  an  express 
or  implied  direction  to  pay  it  therefrom,  and  not  otherwise.     In 

of  paj-ment  necessary  in  a  negotiable  instniment.  Worden  v.  Dodge,  4  Denio 
(N.  Y.)  159. 

80  In  an  action  on  a  promise  to  pay,  where  there  was  certainty  as  to  payer, 
payee,  and  amount  and  date,  it  was  held  that  the  words,  "as  per  memoran- 
dum of  agreement,"  did  not,  of  themselves,  make  the  promise  conditional, 
but  it  was  upon  the  defendant  to  prove  that  such  was  their  effect  Jui-y  v. 
Barker,  El.  Bl.  &  El.  459.  In  this  connection,  see,  also,  Lovell  v.  Hill,  6  Car. 
&  P.  238,  and  Jarvis  v.  Wilkins,  7  Mees.  &  W.  410;  Richardson  v.  Carpenter, 
46  N.  Y.  661. 

61  Lewis  V.  Berry,  64  Barb.  593;  Parker  v.  City  of  Syracuse,  31  N.  Y.  37G; 
Alger  V.  Scott,  54  N.  Y.  14;  Risley  v.  Smith,  64  N.  Y.  576;  Ehrichs  v.  De 
MUl,  75  N.  Y.  370;  Brill  v.  Tuttle,  81  N.  Y.  457. 

6  2  Brill  V.  Tuttle,  81  N.  Y.  457. 


Ch.    2]       CERTAINTY    AS   TO    THE   TERMS   OF   THE    ORDER   OR    PROMISE.       A'd 

the  absence  of  express  words,  it  is  a  question  of  construction 
whether  the  fund  in  question  is  referred  to  as  a  measure  of  liabil- 
ity or  means  of  reimbursement.^^  Where  the  words  themselves 
used  are  ambiguous,  the  rules  we  have  already  given  apply."* 
Where  there  are  no  express  words,  then  the  fact  that  the  ordinary 
language  of  a  draft  is  used  implies  an  intention  to  make  the  or- 
der negotiable.  And  this  implication  overrides  the  presumption 
that  it  was  intended  as  an  equitable  assignment.®^  It  is  thought 
the  duty  of  the  drawer  to  plainly  make  the  instrument  limited 
upon  a  particular  fund,  if  he  intended  it  to  be  so.  If  he  omitted 
to  do  this,  in  the  absence  of  any  words  in  the  instrument,  or  where 
the  words  used  are  obscure,  ambiguous,  or  uncertain,  the  courts 
start  out  with  the  assumption  that  the  instrument  was  intended 
to  be  a  negotiable  one,  and  await  proof  to  the  contrary.®' 

Terms  Collateral  or  Incidental  to  Order  or  Promise. 

The  reasons  we  have  given  control  the  courts  where  the  instru- 
ment in  form  of  an  order  or  a  promise  to  pay  money  is  a  prom- 
ise to  pay  absolutely  and  at  all  events,  but  connected  with  it 
are  other  terms  or  contingencies  which  seem  at  first  glance  a  part 
of  the  promise.^^  With  these  cases  the  instrument,  instead  of  be- 
ing a  transfer  of  a  particular  property  or  right,  remains  a  trans- 

«3  Schmittler  v.  Simon,  101  N.  Y.  554,  5  N.  E.  452. 

6*  See  page  35,  supra. 

e»  Schmittler  v.  Simon,  101  N.  Y.  554,  5  N.  E.  452. 

6  6  An  instrument  in  the  following  language:  "Mr.  I,  B.  C.  &  Co.:  Please 
pay  C.  A.  CL  $100.90,  and  take  the  same  out  of  our  share  of  the  grain," — is  a 
valid  bill  of  exchange.  Corbett  v.  Clark,  45  Wis.  403,  Johns.  Cas.  Bills  &  N. 
28.  A  request  of  the  maker  upon  the  drawee  to  pay  to  a  certain  person  a 
certain  amovmt  of  money  "as  my  quarterly  half  pay,  to  be  due  from  24th  of 
June  to  27th  of  September  next,"  was  held  to  constitute  a  bill  of  exchange, 
since  the  pay  was  a  certain  fund,  and  in  distinction  to  Jenney  v.  Herle,  2 
Ld.  Raym.  1361,  where  the  writing  was  simply  a  private  order  to  a  servant, 
and  also  to  Josselyn  v.  Lacier,  10  Mod.  294.  See,  also,  Macleed  v.  Snee,  2 
Strange,  762;  Sproat  v.  Matthews,  1  Term  R.  1S2;  Redman  v.  Adams,  51  Me. 
429;    Spurgm.  v.  McPheeters,  42  Ind.  527. 

67  Macleed  v.  Snee,  2  Strange,  762;  Banner  v,  Johnston,  L.  R.  5  H.  L.  157;. 
Kelley  v.  Brooklyn,  4  Hill  (N.  Y.)  263;  Griffin  v.  Weatherby,  L.  R.  3  Q.  B. 
753;  Corbett  v.  Clark,  45  Wis.  403;  Coursin  v.  Ledlie.  31  Pa.  St.  506;  Col- 
lins V.  Bradbury,  64  Me.  37;   Littlefield  v.  Hodge,  0  Midi.  326. 


44  OF    NEGOTIABLE    BILLS    AND    NOTES.  [Cll.   2 

fer  which  is  guarantied  by  the  whole  credit  of  the  transferrer. 
The  other  terms  of  the  instrument,  as  re;:;ards  the  main  order  or 
promise,  are  mere  surplusage.  The  point  to  determine  is  whether 
the  stipulation  is  a  part  of  or  necessary  to  the  fulfillment  of  the 
promise  or  order.  If  it  is  not  a  promise  to  pay  absolutely,  it  im- 
pairs the  essential  characteristic  of  certainty,  and  destroys  the  in- 
strument's negotiability.  The  case  commonly  referred  to  as  the 
leading  authority  is  Wise  v.  Charlton. ^^  This  was  a  promise  to 
pay  £125,  and  contained  the  added  words,  "And  I  have  deposited 
<'ertain  title  deeds  as  collateral  security."  It  was  contended  that 
the  right  to  transfer  the  deeds  was  not  negotiable,  while  the  right 
to  transfer  the  note  was,  but  the  court  held  that  the  memorandum 
of  security  was  not  imported  into  the  main  agreement,  which  was 
to  pay  money.  Examples  of  this  rule  are  memoranda  upon  the 
face  of  an  instrument  showing  for  what  consideration  it  was  given, 
as  that  it  "is  secured  according  to  the  condition  of  a  certain  mort- 
gage," ®'  or  that  "it  was  given  in  consideration  of  a  patent  right."  ""^ 
In  New  York  the  leading  case  is  Leonard  v.  Mason.^^  There  the 
■draft  was:  "Levi  Mason,  Esq.:  Please  pay  the  above  note,  and 
hold  it  against  me  in  our  settlement."  The  court  said  the  reference 
in  the  note  was  merely  to  ascertain  the  amount,  and  to  hold  it  as 
a  voucher  in  the  coming  settlement  between  the  parties.  Hodges 
V.  Shuler^'^  is  also  noteworthy.  There  the  promise  was  "to  pay 
^1,000,  with  interest,  payable  as  per  interest  warrants;  or,  upon 
the  surrender  of  this  note,  together  with  interest  warrants,  to  the 
treasurer  of  the  company,  he  [the  treasurer]  shall  issue  to  the  holder 
thereof  ten  shares  of  stock,"  etc.  There  were  thus  two  courses  open 
to  the  holder  of  the  instrument,  but  not  to  the  maker.  His  prom- 
ise for  the  payment  of  a  sum  of  money  was  unconditional.  He 
might  not  pay  in  money  or  in  stock,  but  the  holder  might,  at  his 
oi)tion,  surrender  the  note  and  take  the  stock,  thus  in  no  wise 
compromising  the  right  of  any  holder  to  collect  the  full  amount 
of  money  called  for  by  the  instrument.     The  stipulation  concerning 

«8  4  Adol.  &  E.  786. 

«9  Hereth  v.  Meyer,  33  Ind.  511;   Mott  v.  Havana  Nat.  Bank,  22  Ilun.  351. 

7  0  Tassey  v.  Church,  4  Walts  &  S.  141. 

71  1  Wend.  522. 

••2  22  N.  Y.  111. 


Ch.    2]       CERTAINTY    AS   TO   THE   TERMS   OF   THE    ORDER    OR    PROMISE.       45 

the  stock  was  an  incident  to  the  note,  not  of  the  essence  of  the 
promise  to  pay  money.^* 

Payment  in  Alternative. 

This  test  determines  also  the  negotiability  of  that  large  class  of 
instruments  payable  in  the  alternative  which  are  deemed  by  the 
courts  absolute  promises  for  the  payment  of  money  J*  Such  are  options 
between  payment  of  money  and  the  delivery  of  some  other  thing.''' 
The  courts  declare  that  "the  instrument  is  no  less  an  absolute  prom- 
ise for  the  payment  of  money  because  it  vests  the  holder  with  the  op- 
tion to  take  payment  in  something  else  than  money."  The  reason  is 
that  the  maker  or  party  on  whose  credit  the  instrument  circulates  is 
absolutely  bound,  and  bound,  moveover,  to  pay  money  alone.  As  long 
as  this  is  the  obligation  of  the  promisor,  it  would  be  inexpedient  to 
deny  tlie  instrument  the  immunities  of  negotiability  because  of 
stipulations  which  are  beneficial,  and  perhaps  may  add  to  its 
value.  These  stipulations  vest  in  the  promisee  or  person  who  dis- 
counts the  bill  or  note  the  option  whether  he  will  enforce  them  or 
not.    The  maker,  in  every  event,  is  bound  absolutely  to  pay  money. 

Payment  on  Demand  or  at  Sight. 

For  a  like  reason  instruments  payable  on  demand  ^^  or  at  sight  are 
negotiable.  The  holder,  at  his  option,  may  fix  the  liability  of  the 
maker.  He  may  thus  know  exactly  what  to  pay  for  them  when  he 
discounts  them.  They  have  a  clear,  definite  value  in  the  market, 
and  are  thus  negotiable."  They  were  drawn  at  first  with  the  evi- 
dent purpose  that  merchants  might  for  their  own  convenience  fix 
the  liability  by  presentment  or  demand,  when  the  holder  chose. 
This  never  was  an  indefinite  time.  Such  a  rule  would  have  been  a 
hardship  to  the  drawer,  maker,  or  parties  already  liable  upon  the 
instrument.     But,  said  the  courts,  such  presentation  or  demand 

T3  0atman  v.  Taylor,  29  N.  Y.  649;  Willoughby  v.  Comstock,  3  Hill,  389; 
Fairchild  v.  Railroad  Co.,  15  N.  Y.  337. 

7  4  Kirk  V.  Dodge  Co.  M.  Ins.  Co.,  39  Wis.  138;  Heard  v.  Dubuque  Co. 
Bauk,  8  Neb.  16. 

75  Owen  v.  Barnum,  2  Gilman,  461;  Preston  v.  Whitney,  23  Mich.  260; 
Dennett  v.  Goodwin,  32  Me.  44. 

7  6  Works  V.  Hershey,  35  Iowa,  340. 

77  Shenton  v.  James,  5  Q.  B.  199. 


46  OF    NEGOTIABLE    BILLS    AND    NOTES.  [Ch-   2 

must  be  made  witliin  a  reasonable  time/*  meaning  that  the  parties, 
their  credit,  their  residence,  and  other  circumstances  of  that  char- 
acter, being  looked  to,  the  matter  of  reasonableness  might  be  left 
either  to  the  court  or  the  jury,  or  the  court  and  jury,  under  certain 
fixed  rules,  and  accordingly  as  the  question  of  diligence  was  applied 
in  different  jurisdictions.''®  Certain  of  these  rules  were,  however, 
very  generally  applied.  In  ordinary  business  situations,  in  the  in- 
stance of  a  bill  payable  at  so  many  days  after  sight,  or  payable  at 
sight,  a  reasonable  period,  while  it  did  not  mean  the  very  day  when 
the  bill  was  dated,  or  when  it  came  to  the  hands  of  the  holder,  did 
not  mean  either  that  the  bill  should  be  treated  as  or  be  held  for  a 
single  hour  as  a  time  instrument  or  obligation.  And  if  no  time  was 
allowed  for  the  convenience  of  the  person  on  whom  the  bill  was 
drawn,  the  words  "on  demand,"  or  "at  sight,"  or  "after  sight,"  were 
construed  to  mean  that  a  presentation  or  demand  must  be  made 
as  soon  as  the  holder  could  mate  it.  And  allowing  for  his  con- 
venience, if  the  parties  reside  in  the  same  town,  the  presentation  or 
demand  must  be  made  the  next  day  after  it  came  to  the  holder's 
hands,  or  longer,  according  to  the  distance  of  the  parties  from  each 
other,  and  other  circumstances  which  may  reasonably  prevent 
the  prompt  performance  of  the  act.     The  term  "demand,"  or  "at 

78  Muilman  v.  D'Eguino,  2  H.  Bl.  565;  Robinson  v.  Ames,  20  Johns.  14G; 
Wallace  v.  Agry,  4  Mason,  336,  Fed.  Cas.  No.  17,096;  Id.,  5  Mason,  118,  Fed. 
Cas.  No.  17,097;  Montelius  v.  Charles,  76  III.  303;  Jordan  v.  Wheeler,  20 
Tex.  698.  In  the  case  of  Burkhalter  v.  Second  Nat  Bank,  the  plaintiffs  pre- 
sented a  draft  by  the  defendant,  upon  the  day  it  was  received,  and  the 
•drawee  gave  a  check,  taking  the  di-aft,  and  charging  same  to  defendant.  On 
the  following  day  the  check  was  dishonored  upon  presentation.  The  plain- 
tiffs returned  the  checli,  and  having  recovered  the  draft,  again  presented  it. 
Payment  was  refused,  and  it  was  protested.  It  was  held  by  the  court  that: 
^'The  plaintiffs  were  bound  to  demand  payment  of  the  first  draft  on  the  day 
It  was  received,  or  on  the  next  day,  and  they  had  the  right  to  hold  until  the 
next  day,  *  ♦  *  and  a  demand  on  the  same  day,  or  on  the  next  day,  is. 
in  law,  a  demand  within  a  reasonable  time."  42  N.  Y.  538.  Upon  this  point 
see  Phoenix  Ins.  Co.  v.  Allen,  11  Mich.  501;  Phoenix  Ins.  Co.  v.  Gray,  13  Mich. 
191;  Nutting  v.  Burked,  48  Mich.  241,  12  N.  W.  184;  Montelius  v.  Charles,  7() 
111.  303;  Strong  v.  King,  35  111.  9;  Bachellor  v.  Priest,  12  Pick.  (Mass.)  399; 
Prescott  Bank  v.  Caverly,  7  Gray  (Mass.)  217;  Fall  River  Union  Bank  v.  Wil- 
lard,  5  Mete.  (Mass.)  216. 

79  Bowman  v.  McChesney,  22  Grat.  609. 


Ch.  2]   CERTAINTY  AS  TO  THE  TERMS  OF  THE  ORDER  OR  PROMISE.   47 

sight,"  was  construed  as  not  meaning  a  term  of  credit,  because 
an  unanswerable  question  would  be  raised,  as  to  the  period  of 
that  credit.  And,  therefore,  in  cases  of  such  instruments,  and  of 
instruments  containing  phrases  similar  to  them,  such  as  "pay- 
able when  demanded,"  ^^  or  "on  call,"  or  "when  called  for,"  ®^  all  of 
which  mean  the  same  thing,  it  was  adjudged  to  be  the  duty  of 
the  holder  to  make  the  presentation  at  as  early  a  date  as  was  pos- 
sible.*^ Similar  methods  of  construction  were  employed  where 
the  instrument  failed  to  express  any  time  of  payment  at  all.  In 
such  cases  it  was  reasoned  that  the  instrument  would  become 
due  some  time,  and  where  the  parties  themselves  failed  to  fix  any 
time,  the  law  fixed  one  for  them,  which  was  immediately.  Thus 
instruments  which  failed  to  contain  an  expression  of  the  time 
of  payment  were  deemed  equivalent  to  instruments  payable  on 
demand,*^  and  the  rules  we  have  heretofore  given  applied  to  them. 

80  Bowman  v.  McChesney,  22  Grat.  609.  A  promise  made  in  writing  to  pay 
a  certain  amount  on  demand,  "giving  six  months'  notice  for  the  same,"  was 
held  to  be  a  good  note  in  the  case  of  Wallier  v.  Roberts,  Car.  &  ]VL  590.  Hall 
V.  Toby,  110  Pa.  St.  318,  1  Atl.  369. 

81  Crossmore  v.  Page,  73  Cal.  213,  14  Pac.  787;  Dixon  v.  Nuttall,  1  Cromp. 
M.  &  R.  307. 

82  Merritt  v.  Todd,  23  N.  Y.  28.  See,  contra.  Field  v.  Niclierson,  13  Mass. 
131;  Ranger  v.  Gary,  1  Mete.  (Mass.)  369;  Fm-man  v.  Haskin,  2  Gaines,  369. 
But  an  insti'ument  on  demand  after  date,  with  interest,  is  constinied  to  be  a 
continuing  security.  Merritt  v.  Todd,  23  N.  Y.  28.  The  reason  is  that  the 
words  "with  interest"  imply  it  was  given  for  time,  but  demand  after  date 
contains  no  such  implication.  Grim  v.  Starkweather,  88  N.  Y.  339,  where  de- 
mand must  be  made  in  a  short  time.  See,  also,  Shutts  v.  Fiugar,  100  N.  'Y. 
539,  3  N.  B.  588;  Parker  v.  Stroud,  98  N.  Y.  379.  The  student  should  note 
that  the  only  real  difference  between  the  construction  of  the  terms  "on  de- 
mand" and  "at  sight"  is  that,  except  where  modified  by  statute,  a  sight  bill 
is  entitled,  under  the  common-law  rules,  to  grace,  Walsh  v.  Dart,  12  Wis. 
635;  Cribbs  v.  Adams,  13  Gray,  597;  Hart  v.  Smith,  15  Ala.  807;  Lucas  v. 
Ladew,  28  Mo.  342,  as  are  bills  payable  after  sight  and  bills  payable  on  de- 
mand, or  without  specification  of  time,  are  not.  Oridge  v.  Sherborne,  11  Mees. 
&  W.  374;  Woodruff  v.  Merchants'  Bank,  25  Wend.  673;  1  Pars.  Bills  &  N. 
381;    Dunkle  v.  Nichols,  101  Ind.  474. 

83  A  note  specifying  no  time  of  payment  is  in  legal  effect  payable  on  de- 
mand. This  is  so  even  though  it  provides  for  interest.  First  Nat.  Bank  v. 
Price,  52  Iowa,  570,  3  N.  W.  639;  Id.,  Johns.  Gas.  Bills  &  N.  19.  "The  conclusion 
of  the  law  is  that,  where  no  time  of  payment  is  specified  in  a  note,  it  is  pay- 
able immediately."    Per  Guriam,  in  Herrick  v.  Bennett,  8  Johns.  (N.  Y.)  374. 


48  OF   NEGOTIABLE    BILLS    AND    NOTKS.  [Ch.  2 

Payment  in  Installment/t. 

It  remaiiis  t*.  notice  instruments  payable  in  installments.  An 
instrument  may  be  payable  in  installments  due  at  specified  times, 
or  it  may  be  payable  in  installments  due  at  fixed  times,  the 
whole  sum  to  become  due  on  the  default  in  the  payment  of  any 
installment.  And  either  clause,  with  what  seems  a  lack  of  ap- 
preciation of  sound  business  methods,  the  courts  declare  to  be 
proper  for  a  negotiable  instrument.**  From  a  business  point  of 
view,  a  man  may  as  well  give  one  piece  of  paper  payable  in 
several  installments,  as  divide  up  the  principal  indebtedness  and 
give  separate  instruments  for  it.  But  there  is  a  great  difference 
between  such  an  instrument  and  one  which  may  beqpme  wholly 
due,  at  the  i)ayee's  option,  by  reason  of  a  default  at  any  one  of  a 
series  of  times.  With  such  an  instrument,  the  indorser  can  never 
be  quite'Sure  what  sum  of  money  he  must  have  at  hand  wherewith 
to  pay,  in  case  the  acceptor  or  maker  does  not,  and  the  rule  and 
the  ruling  of  the  courts,  as  they  seem  at  present  to  stand,  may 
be  construed  as  in  derogation  of  the  principles  of  certainty,  which 
are  of  the  first  importance  to  the  negotiability  of  instruments.*'' 

84  Carlon  v.  Kenealy,  12  Mees.  &  W.  139.  In  this  case  the  note  was  to  be- 
come immediately  payable  on  default  in  payment  of  the  first  installment 
There  was  a  special  demurrer  claiming  that,  since  the  second  installment 
was  payable  by  way  of  condition,  the  note  was  not  negotiable.  The  follow- 
ing was  a  portion  of  the  opinion  of  the  court:  "It  is  not  a  contingency;  it 
depends  on  the  act  of  the  maker  himself;  and,  on  his  default,  it  becomes  a 
promissory  note  for  the  whole  amount."  Roberts  v.  Snow,  27  Neb.  425,  43 
N.  W.  241. 

8  5  Miller  v.  Biddle,  13  Law  T.  (N.  S.)  334.  "This  was  an  action  upon  a  prom- 
issory note,  not  made  payable  to  order  or  bearer,  and  payable  by  install- 
ments, with  a  condition  that  if  any  installment  were  not  duly  paid  the  whole 
sum  should  become  due  immediately."  In  accordance  with  the  case  of  Car- 
lon V.  Konealy,  supra,  the  instrument  was  held  negotiable.  Goshen  &  M. 
Turnpike  Road  v.  Hurtin,  9  Johns.  217;  Washington  Co.  Mut.  Ins.  Co.  v.  Miller, 
26  Vt  77. 


Ch.   2]  PAYMENT    OF    MONEY    ONLY.  49 


PAYMENT  OF  MONEY  ONLY. 

23.  The  instrument  must  be  for  payment  in  the  medium 
of  money  alone. ^ 

24.  A  negotiable  instrument  in  terms  must  not  be  for 
payment  in  any  other  species  of  property  than  money. 

25.  A  negotiable  instrument  must  be  for  the  payment 
of  money  \<7-ithout  connected  promise,  vrhether  disjunctive 
or  conjunctive,  for  the  performance  of  some  other  act. 

26.  The  amount  of  money  to  be  paid  must  be  certain. 
EXCEPTIONS— (a)  That    the    instrument   is    payable 

■with  interest  does  not  destroy  its  negotiability, 
(b)  That  the   instrument  is   payable  with  current  ex- 
change does  not  destroy  its  negotiability. 

We  have  already  pointed  out  that  orders  for  goods  were  mere 
equitable  assignments.  And  so  promises  to  pay  in  goods  are  like- 
wise nothing  more  than  special  contracts  for  delivery  of  chattels.*^ 
And  it  is  our  purpose  to  show  briefly  why  such  assignments  or 
promises  are  contrary  to  the  theory  of  negotiability.®* 

88  In  an  action  on  a  note  promising  that  the  maker  would  be  accountable 
to  the  plaintiff  or  his  order  for  £100,  value  received,  it  was  held  that  this  was 
equivalent  to  a  promise  to  pay,  since  no  precise  words  are  requisite  to  form  a 
promissory  note,  and  in  this  case  the  intention  was  plain,  since  indorsees 
could  not  settle  an  account  with  the  maker.  Morris  v.  Lee,  1  Strange,  629. 
In  the  case  of  Rex  v.  Wilcox,  the  question  arose  as  to  whether  an  agreement 
to  pay  "in  cash  or  Bank  of  England  notes"  was  a  promissory  note.  It  was 
held  by  a  majority  of  the  court  that  it  was  not.    Bayley,  Bills  (Gth  Ed.)  11. 

87  Matthews  v.  Houghton,  11  Me.  377;  Rhodes  v.  Lindley,  Ohio  Cond.  R. 
465;  Lawrence  v.  Dougherty,  5  Yerg.  435;  Auerbach  v.  Pritchett,  58  Ala. 
451;  Smith  v.  Boheme,  1  Chit  Jr.  Bills.  234;  Clark  v.  King.  2  Mass.  524; 
Gushee  v.  Eddy,  11  Gray  (Mass.)  502.  In  Quinby  v.  Merritt  it  was  held  that 
a  written  agreement  to  pay  the  equivalent  of  a  certain  sum  in  labor  did  not 
constitute  a  promissory  note.    11  Humph.  (Tenn.)  439. 

8  8  The  written  statement  that  the  v^riter  had  received  a  certain  sum  from 
the  person  addressed,  and  that  he  was  accountable  to  such  person  for  the  same, 
was  held  to  be  a  special  agreement,  and  not  a  promissory  note.  Home  v.  Ked- 
fearn,  4  Bing.  N.  C.  433.    An  order  by  the  manager  of  a  company,  to  its  cashieCf 

NEG.  BILLS — 4 


50  OF   NEGOTIAUl.E    nil.I.S    AND    NOTES.  [Ch.   2 

Definition  of  "Money." 

The  meaning  of  "money,"  as  applied  to  bills  and  notes,  is  de 
termined  in  the  United  States  by  the  acts  of  congress  known  as 
the  "Legal  Tender  Acts."  *^  Whatever  may  be  used  as  a  legal 
tender  is  money.  The  determining  point  is  whether  the  medium  of 
paj'ment  specified  in  the  bill  or  note  is  legal  tender  for  the  payment 
of  debts  at  the  place  of  the  payment  of  the  bill  or  note.     There  have 

"to  credit  Messrs.  Plummer  &  Co.,  or  order,  in  cash,"  was  held  to  be  a  bill  of 
exchange,  since  It  was  an  order  to  hold  to  the  use  of  a  third  person,  and 
was  equivalent  to  an  order  to  pay  money.  Ellison  v.  Collingridge,  9  C.  B. 
570.  The  following  promises  to  pay  have  been  held  to  constitute  good  notes: 
A  note  payable  "in  the  bank  notes  current  in  the  city  of  New  York";  on  the 
ground  that  it  is  confined  to  bank  paper  of  known  cash  value.  Judah  v. 
Harris,  19  .Johns.  (N.  Y.)  144.  A  note  payable  in  Tennessee  money.  It  was 
held  that  such  a  note  was,  to  all  legal  intents,  payable  in  gold  or  silver.  "The 
ease  is  different  where  it  is  paj^able  in  Tennessee  bank  notes."  Searcy  v. 
Vance,  Mart.  &  Y.  (Tenn.)  225.  As  to  a  note  made  and  indorsed  in  Michigan, 
payable  in  Canada,  "in  Canada  cuirency,"  see  Black  v.  Ward,  27  Mich.  191; 
Phoenix  Ins.  Co.  v.  Allen,  11  Mich.  501. 

89  Rev.  St.  U.  S,  §§  3584-3590.  Common  terms  excluded  by  the  above  rule 
are  "Funds  cuiTent,"  "current  money,"  "currency,"  "current  funds,"  "current 
bank  paper,"  "current  bank  bills,"  "common  cuiTency,"  "notes  receivable  in 
bank,"  "currency  of  Missouri,"  "current  bank  notes,"  "bank  notes,"  "New  York 
funds,"  "Arkansas  money,"  "foreign  bills,"  "Pennsylvania  bank  bills,"  "Missis- 
sippi bank  notes,"  "York  state  bills,"  or  "specie."  Irvine  v.  Lowry,  14  Pet.  293; 
Hasbrook  v.  Palmer,  2  McLean,  10.  Fed.  Cas.  No.  6,188;  Fry  v.  Reusseau,  3 
McLean,  lOG,  Fed.  Cas.  No.  5,141;  Hawkins  v.  Watkins,  5  Ark.  481;  .Jones  v. 
Fales,  4  Mass.  245;  Young  v.  Adams,  G  Mass.  182;  Leiber  v.  Goodrich,  5 
Cow.  ISO;  State  v.  Corpeniug.  10  Ired.  58;  Besancon  v.  Shirley,  9  Smedes  & 
M.  457;  Keith  v.  Jones,  9  .lohns.  120;  Collins  v,  Lincoln,  11  Vt  2(58;  Camp- 
bell V.  Weister.  1  Litt.  (Ky.)  .^0:  Breckinridge  v.  Ralls,  4  T.  B.  Mon.  533: 
Simpson  \.  ;Moulden,  3  Cold.  429.  With  reference  to  the  apparent  irreconcila- 
bility of  some  of  the  cases,  Mr.  Wood  makes  the  following  explanation:  "It 
will  be  seen,  upon  examination  of  the  cases,  that  many  of  them  are  not  so 
irreconcilable  as  at  first  sight  they  may  appear.  Many  of  them  construe  the 
words  'current  money.  New  York  funds,'  etc.,  used  in  bills  and  notes,  to  mean 
lawful  gold  and  silver  coin  of  the  United  States.  A  contract  for  the  payment 
ef  a  certain  sum  in  bank  notes  or  other  paper  cuiTency  maj*  or  may  not  be 
equivalent  to  that  sum  in  specie.  The  extent  of  the  obligation  depends  on  tBe 
meaning  which  usage  affixes  to  the  terms  at  the  time  the  contract  was  made." 
Byles,  Bills  (Wood's  Notes)  p.  95. 


Ch.  2]  PAYMENT  OF  MONEY  ONLY.  51 

been  decisions  which  have  varied  from  this  test.  When,  by  the 
statute  of  Victoria,*"  "Canada  bills"  were  made  legal  tender,  the 
court  of  Upper  Canada  said:  ®^  "It  may  be  that  a  person  can  make 
a  promissory  note  payable  in  a  particular  coin,  as  in  gold  or  silver, 
because  they  are  respectively  money  and  specie;  but  I  think  he  can- 
not make  it  payable  in  Canada  bills,  because  they  are  not  money  or 
specie.  They  have  no  intrinsic  value,  as  coin  has;  they  represent 
only,  and  are  the  signs  of,  value.  Money  itself  is  a  commodity;  it 
is  not  a  sign ;  it  is  the  thing  signified."  But  the  better  view  is  that 
taken  in  New  York,  where  the  courts®-  declare  all  descriptions  of 
cash  other  than  legal  tender  to  be  "collateral  commodities,  like  ingots 
or  diamonds,  which,  though  they  might  be  received  and  be  in  fact 
equivalent  to  money,  are  yet  but  goods  and  chattels."  The  fact  that 
coins  of  other  countries  are  current  in  this  state  does  not  make 
them  legal  tender.  It  is  the  words  of  the  law  which  declare  this, 
and  that  is  the  test  to  be  applied. 

Payment  in  Property  other  than  Money. 

The  real  reason  for  this  position  probably  is  that  money  is  the  one 
standard  of  value  in  actual  business.     All  other  commodities  may 
rise  and  fall  in  value,  but  in  theory,  at  least,  money  always  measures 
this  rise  and  fall,  and  remains  the  same.     A  bill  or  note  in  terms 
for  payment  in  other  property  than  money  is  clearly  non-negotiable. 
It  cannot  be  determined  from  the  inspection  of  the  instrument  what 
value  is  sought  to  be  transferred  by  it.     It  thus  cannot  act  as  a 
circulating  medium.     The  chattel  which  is  used  as  a  means  of  pay- 
ment may  fluctuate  in  value.     Thus,  "a  note  payable  in  neat  cat- 
tle," ®^  a  promise  to  pay  "in  a  good  horse,  to  be  worth  $80.00,  and 
goods  out  of   store  amounting  to  |20.00,"  ®* — are   non-negotiable. 
These  instruments  are  special  contracts,  and  not  negotiable  instru- 
ments.    The  damages  recoverable  upon  them  are  held  to  be  in  some 
states  the  actual  value  of  the  articles  on  the  day  stipulated  for  pay- 
so  29  &  30  Vict.  c.  10. 
91  Gray  v.  Worden,  29  U.  C  Q.  B.  535. 
8  2  Thompson  v.  Sloan,  23  Wend.  71. 
»8  Jerome  v.  Whitney,  7  Johns.  322. 

94  Thomas  v.  Roosa,  7  Johns.  461.    For  other  authorities  see  Byles,  Bills 
(Wood's  Notesj  p.  95. 


52  OF    NEGOTIABLE    BILLS    AND    NOTES.  [Ch.   2 

ment;'"  but  in  New  York,"  although  it  is  admitted  that  these  con- 
tracts are  merely  for  the  delivery  of  specific  articles,  yet  when  the 
words  were,  "To  pay  J.  P.  $79.50,  Aug.  1st,  1822,  in  salt,  at  14s. 
per  bbl.,"  it  was  held  that  it  was  intended  at  the  time  of  making  the 
contract  to  receive  the  goods  instead  of  money,  and  that  the  goods 
had,  therefore,  a  fixed  value,  which  must  be  treated  as  the  measure 
of  damages.  In  other  respects,  the  debtor  must  seek  his  creditor  to 
perform  the  contract  as  is  the  usual  rule.  If  the  chattels  are 
ponderous,  the  maker  of  the  note  must  seek  the  payee,  and  see 
where  he  will  receive  them. 

Payment  in  Foreign  Money. 

There  is  one  deviation  from  this  rule,  which  it  is  important  to 
notice.  Where  a  bill  or  note  is  made  payable  in  money  of  a  foreign 
denomination,  it  is  still  negotiable.^''  This  is  because  the  courts, 
under  the  statutes  of  the  United  States,^*  will  take  judicial  notice 
of  the  fact  that  the  value  of  foreign  coin,  as  expressed  in  the  money 
of  account  in  the  United  States,  shall  be  that  of  the  pure  metal 
of  such  coin  of  standard  value;  and  that  the  value  of  the  stand- 
ard coin  of  the  various  nations  of  the  world  in  circulation  is  es- 
timated annually  by  the  directors  of  the  mint,  and  proclaimed  on 
the  first  day  of  January  by  the  secretary  of  the  treasury.  These 
foreign  denominations  therefore  can  always  be  paid  in  our  own  coin 
of  equivalent  value,  to  which  it  is  always  reduced  on  a  recovery.** 
In  an  action  upon  such  an  instrument  the  course  is  to  prove  the  value 

9  8  McDonald  v.  Hodge,  5  Hayw.  (Tenn.)  85;  Edgar  v.  Boies,  11  Serg.  &  R. 
445;  McGehee  v.  Posey,  42  Ala.  330. 

86  Pinney  v.  Gleason,  5  Wend.  393.  Vermont,  Connecticut,  and  Ohio  have 
a  similar  rale.  Culver  v.  Robinson,  3  Day  (Conn.)  68;  Perry  v.  Smith,  22 
Vt.  301. 

97  In  the  case  of  St.  Stephen  Branch  Ry.  Co.  v.  Black,  which  was  an  action 
on  a  note  payable  in  United  States  currency,  it  was  held  that  such  note  was 
for  the  payment  of  money  only,  since  the  equivalent  was  ascertainable,  and 
the  note  was  negotiable.  2  Hann.  (N.  B.)  139.  A  bill  drawn  in  Montreal  on 
a  firm  in  New  York,  payable  in  New  York  in  dollars,  was  held  to  be  negotia- 
ble, as  It  had  all  the  qualities  of  a  bill  of  exchange,  and  was  payable  abso- 
lutely and  in  money.    Chrysler  v.  Renois,  43  N.  Y.  209, 

98  Rev.  St.  U.  S.  §  3564. 

99  2  Chit.  Bills  (Am.  Ed.  1839)  615,  616;   Deberry  v.  Darnell,  5  Yerg.  451. 


Gh.    2]  PAYMENT    OF    MONEY    ONLY.  53 

of  the  sum  expressed  in  our  own  tenderable  coin,  because  the  instru- 
ment can  be  construed  bj  the  courts  to  be  payable  in  no  other.^°" 
In  the  calculation  of  this  sum  there  is  to  be  added  the  item  call- 
ed "exchange."  This  means  the  difference  in  value  in  the  same 
amotmt  of  money  in  different  countries.  Thus,  in  the  illustra- 
tion in  the  footnote  to  section  10,  if  there  were  more  debts  due  from 
England  to  Jamaica  than  from  Jamaica  to  England,  the  demand 
in  England  for  bills  on  Jamaica  will  be  greater  than  the  demand 
in  Jamaica  for  bills  on  England.  Hence,  in  England,  where  there 
are  many  debtors  to  creditors  in  Jamaica,  it  will  be  more  expensive 
to  procure  a  bill  on  Jamaica  than  it  would  be,  in  Jamaica,  to  procure 
a  bill  on  England.  Thus  B,  in  England,  would  be  obliged  to  pay  A 
something  for  the  debt  C,  in  Jamaica,  owes  to  A,  in  England,  be- 
cause the  other  English  debtors  will  willingly  pay  something  * 
avoid  the  risk  and  expense  of  transmitting  money  to  discharge  their 
debts.  And  thus  B  must  pay  A  something  in  addition  for  the  draft 
which  A  sells  him,  and  which  A  could  otherwise  sell  in  the  open 
market.  This  something  is  the  amount  which  it  will  cost  to  re- 
place the  £1,000  in  England  in  Jamaica,  or  which  the  right  to  a 
sum  of  money  due  in  Jamaica  will  produce  in  money  in  England. 
The  rate  of  cost  depends  upon  the  balance  of  trade  with  England; 
and  if  it  is  excessive  and  is  suflflcient  to  pay  the  expenses  of  ex- 
porting the  precioua  metals,  gold  will  be  sent  in  preference  to  bills 
of  exchange  purchased  at  the  current  rate."^  This  item,  as  has 
been  said,  is  to  be  added,  and  the  courts  construe  the  instrument  to 
mean,  where  it  is  drawn  in  one  country,  payable  in  another,  and  the 
amount  is  expressed  in  the  money  of  the  former,  that  the  amount 
must  be  calculated  according  to  the  rate  of  exchange  on  the  day  the 
instrument  is  payable.^"^ 

Performance  of  Other  Acts  in  Addition  to  Payment  of  Money 

The  reasons  already  given  have  guided  the  courts  in  laying  down  the 
rule  that  the  order  or  promise  must  not  be  for  the  payment  of  money 

10  0  Thompson  v.  Sloan,  23  Wend.  71;    Bayley,  Bills  (Am.  Ed.  1S3(5)  23. 

10  2  Schermerhorn  v.  Talman,  14  N.  Y.  93,  page  13G. 

103  Grant  v.  Healey,  3  Sumn.  523,  Fed.  Gas.  No.  5,G96;  Smith  v.  Shaw,  2 
Wash.  G.  C.  1G7,  Fed.  Gas.  No.  13,107;  Lee  v.  Wilcocks,  5  Serg.  &  R.  48; 
Bank  of  Missouri  v.  Wright,  10  Mo.  719;  Scott  v.  Bevan,  2  Barn.  &  Adol.  T8; 
Cash  V.  Kennion,  11  Ves.  314. 


64  OF    NEGOTIABLE    BILLS    AND    NOTES.  [Ch.  2 

and  the  performance  of  some  other  act.^"*  The  authority  generally 
quoted  on  this  point  is  Martin  v.  Chauntry.^""  This  instrument  was  a 
note  "to  deliver  up  horses  and  a  wharf  and  to  pay  money."  It  was  held 
not  to  be  a  note  within  the  statute  of  Anne;  for,  said  Baron  Parke  in 
a  later  case/"'  to  constitute  a  promissory  note  the  promise  must  be 
to  pay  a  sum  certain  and  nothing  else.^"^  The  reason  for  this  is 
that  to  ingraft  a  special  agreement  upon  a  general  promise  to  pay 
money  would  be  at  once  to  defeat  its  practical  usefulness  as  a  quasi 
moaey.  Professor  Ames,  with  his  usual  force,  points  out  the  objec- 
tions :  "One  could  be  indorsed,  the  other  would  have  to  be  assigned.  In 
some  jurisdictions  the  action  could  be  brought  by  the  indorsee  in 

10*  The  fact  that  a  note  coDtains  a  contract  as  to  collateral  security,  and 
provides  the  means  for  converting  the  security,  will  not  deprive  it  of  its 
negotiable  property.  The  persons  indorsing  such  instruments  undoubtedly  in- 
tend to  stand  in  the  position,  and  to  incur  the  liabilities,  of  indorsers  of  com- 
mercial paper.  Arnold  v.  Rock  River  V  U.  R.  Co.,  5  Duer  (N.  Y.)  207. 
In  the  case  of  Hosstatter  v.  Wilson,  it  was  held  that  a  note  promising  to 
pay  at  a  certain  time  in  money  (or  in  goods  on  demand)  was  a  good  prom- 
issory note.  The  maker  has  no  election  to  do  otherwise  than  to  pay  money, 
though  the  holder  may  elect  to  take  goods.  36  Barb.  (N.  Y.)  307.  A 
promissory  note  will  not  be  affected,  in  its  character  as  such,  by  a  memo- 
randum attached  that  deeds  are  deposited  as  collateral  security.  "This 
is  an  absolute  promissory  note.  •  •  *  The  instrument  is  quite  valid." 
Wise  V.  Charlton,  4  Adol.  &  E.  7S6.  In  Leonard  v.  Mason  the  following  was 
subscribed,  to  a  promissoiy  note:  "Levi  Mason,  Esq.:  Please  pay  the  above 
note,  and  hold  it  against  me  in  our  settlement.  N.  Leonard."  And  such  re- 
quest was  held  to  be  a  good  bill  of  exchange.  "The  retaining  the  voucher  is 
no  more  the  perfoiinance  of  another  act  beside  the  payment  of  the  money, 
than  the  retaining  the  order  for  the  same  purpose."  1  Wend.  (N.  Y.)  522. 
In  the  case  of  Overton  v.  Tyler,  it  was  decided  that  a  judgment  note  was  not 
negotiable  under  tlie  laws  of  Pennsylvania.  "The  negotiability  of  the  note 
•  •  •  was  instantly  liable  to  be  merged  in  a  judgment,  and  its  circula- 
tion arrested  by  being  attached  as  an  incumbrance  to  the  maker's  land."  3 
Pa.  St.  34G.  A  note  which,  in  addition  to  the  regular  form,  waived  "the  right 
of  appeal,  and  of  all  valuation,  appraisement,  stay,  and  exemption  laws,'' 
was  held  to  be  a  promissory  note,  as  it  was  a  written  promise  to  pay  at  a 
certain  time,  "for  value,  with  interest,  absolutely  and  at  all  events."  Zim- 
merman V.  Anderson,  67  Pa.  St.  421. 

10  5  Martin  v.  Chauntry,  2  Strange,  1271. 

106  Follett  V.  Moore,  4  Exch,  416. 

107  Cook  V.  Satterlee,  6  Cow.  108;  Fletcher  v.  Thompson,  55  N.  W.  308; 
First  Nat.  Bank  of  Port  Hm-on  v.  Carson,  60  Mich.  433,  27  N.  W.  589. 


Ch.  2]  PAYMENT  OF  MONEY  ONLY.  55 

his  own  name,  but  as  assignee  he  could  only  sue  in  the  name  of  his 
assignor.  In  the  case  of  the  negotiable  instrument  being  in  the 
hands  of  a  bona  fide  holder,  no  defense  of  fraud  or  latent  equity 
would  avail ;  in  case  of  the  holder  as  assignee,  all  would  avail."  In 
spite  of  these  objections  the  foregoing  rule  is  much  modified  in  later 
cases.  They  are  classified  by  Mr.  Daniel  ^"^  at  length.  They  are  of 
three  kinds:  (1)  Power  to  confess  judgments;  (2)  waiver  of  exemp- 
tions; (3)  stipulations  for  the  payment  of  expenses  of  collection  and 
attorneys'  fees.  These  instruments,  in  jurisdictions  in  which  they 
are  used,  are  deemed  negotiable,  because  they  facilitate,  rather  than 
clog  circulation.  Further,  they  do  not  contemplate  performance 
until  after  the  note  or  bill  is  due,  and  therefore  are  not  in  violation 
of  the  principles  of  negotiability,  because  a  negotiable  instrument 
ceases  to  be  negotiable  in  its  fullest  sense  after  it  has  become  due. 

Certainty  as  to  Amount  of  Money. 

The  last  of  the  series  of  principles  referring  to  the  payment  of 
money  is  that  the  order  or  promise  must  be  for  the  payment  of  a 
definite  sum  of  money.^°^  By  this  is  meant  that  it  must  specify 
exactly  the  sum  of  money  to  which  it  relates.  It  would  be  useless 
in  the  operations  of  discount  if  the  purchaser  were  obliged  to  have 
reference  to  other  documents  perhaps  not  then  before  him,  to  ascer- 
tain its  value.  And  accordingly,  in  the  leading  case  upon  the 
point,^^°  where  the  instrument  was  in  form  to  pay  £65,  "and  also  all 
other  sums  which  may  be  due,"  Lord  Ellenborough  declared  that 
since  the  total  sum  was  not  specified,  and  could  not  be  ascertained 
otherwise  than  by  reference  to  books  to  ascertain  the  amount  due, 
the  promise  was  neither  a  definite  promise,  nor  was  it  a  single  and 
distinct  one.  To  follow  any  other  rule  would  be  to  nullify  the  legal 
effect  of  the  instrument,  which  is  itself  the  right  of  action.  To  pro- 
duce it,  and  to  prove  it  in  court,  is  sufficient  to  establish  a  prima 
facie  case.  And  the  courts,  in  cases  of  orders  or  promises  to  pay 
"whatever  sums  you  may  collect,"  ^^^  or  "the  demands  of  a  sick 

108  Daniel,  Neg.  Inst.  §§  61,  62,  62a, 

100  Cushman  V.  Haynes,  20  Pick.  132;  Philadelphia  Bank  v.  Newkirk,  2 
Miles,  442;  Jones  v.  Simpson,  2  Barn.  &  C.  318;  Clarke  v.  Percival,  3  Barn. 
&  Adol.  660;   Aurey  v.  Feamsldes,  4  Mees.  &  W.  168. 

110  Smith  V.  Nightingale,  2  Starkie,  375. 

111  Legro  V.  Staples,  16  Me.  252. 


56  OF    NEGOTIABLE    BILLS    AND    NOTES.  [Ch.   2 

club,"*^''  have  wisely  denied  to  them  the  privilege  of  negotiability. 
This  rule  does  not,  however,  exclude  from  negotiability  paper  with 
such  terms  as  "with  interest,"  or  "with  current  exchange."  ^^'  The 
canon  of  construction  is,  "Id  certum  est  quod  certum  reddi  potest." 
And  in  such  instruments  the  mere  inspection  of  the  paper  itself  en- 
ables the  holder,  by  an  almost  mechanical  computation,  to  ascer- 
tain just  what  sum  is  due  upon  it  at  any  given  time.  And  therefore 
such  instruments  n  ay  be  deemed  to  specify  a  given  sum  of  money 
as  definitely  as  though  they  had  stated  the  interest  or  the  exchange 
in  figures  themselves.^ ^*  Of  course  it  may  be  urged,  and  in  fact, 
by  text  writers,^ ^°  has  been  urged,  that  an  instrument  payable  with 
current  exchange  is  invalid  because  the  fluctuations  in  the  rate  of 
exchange  make  it  impossible  to  ascertain  the  amount  payable  when 
the  bill  is  issued  and  because  proving  the  meaning  of  "with  current 
exchange"  necessitates  evidence  outside  of  the  instrument  But 
these  views  thus  taken  are  rather  of  the  letter  of  the  law  than  of  its 
spirit.  The  law  merchant  is  the  result  of  the  custom  of  merchants, 
and  the  statute  of  Anne  is  the  result  of  the  law  merchant.  It  is 
the  custom,  convenience,  and  sound  business  policy  of  merchants 
to  induct  into  negotiable  instruments  the  theory  of  exchange,  and 
this  reason,  therefore,  if  no  other,  makes  exchange  a  necessary 
modification  of  the  general  rule  we  have  laid  down. 

112  Bolton  V.  Dugdale,  4  Barn.  &  Adol.  619. 

113  The  fact  that  an  instrument  for  the  payment  of  a  specific  sum  of  money 
is  made  payable  with  "current  exchange"  on  some  other  place  than  the  place 
of  payment  does  not  prevent  its  being  a  promissory  note.  Hastings  v.  Thomp- 
son (Minn.)  55  N.  W.  968;  .Johns.  Cas.  Bills  &  N.  33;  see,  also,  Smith  v.  Kendall, 
9  Mich.  241;  Johnson  v.  Frisbie,  15  Mich.  286.  There  have,  however,  been  con- 
trary holdings  as  to  this  point,  as  in  the  case  of  I'hiladolphia  Bank  v.  New- 
kirk,  2  Miles,  442. 

114  Smith  v.  Kendall,  9  Mich.  241;  Grutacap  v.  WouUnise,  2  McLean,  581, 
Fed.  Cas.  No.  5,854;  IvOggett  v.  Jones,  10  Wis.  34.  In  the  case  of  Sperry  v. 
Horr,  it  was  held  that  an  agreement  to  pay  a  certain  sum,  providing  that  if 
not  paid  on  maturity,  and  suit  were  brought  thereon,  the  maker  would  pay  col- 
lection and  attorney  fees,  was  a  good  promissory  note.  No  inquiry  was 
necessary  on  maturity,  as  to  facts  not  appearing  on  the  face  of  the  instru- 
ment "The  agreement  for  the  payment  of  attorney  fees  *  •  •  simply  im- 
posed an  additional  liability  in  case  suit  should  be  brought"    32  Iowa,  184. 

116  Edw.  Neg.  Inst  §  154;  Benj.  Chalmers,  p.  18,  and  decisions;  Lowe  v. 
Bliss,  24  III.  168;  Philadelphia  Bank  v.  Newkirk,  2  Miles,  442;  Read  v.  Mc- 
Nulty,  12  Rich.  Law,  445. 


Ch.  2 J  SPECIFICATION    OF    PARTIES. 


SPECIFICATION  OP  PARTIES. 

27.  The  instrument  must  be  specific  as  to  all  its  parties. 

28.  By  signature  is  meant  any  ^written  emblem  made  by 
a  person  'with  the  intent  of  entering  into  a  contract  ob- 
ligation. 

29.  The  note  or  bill  must  contain  the  signature  of  the 
maker   or  makers,  dra^wer  or  drawers. 

30.  The  bill  must  be  addressed  to  some  person. 
EXCEPTIONS— (a)  If  the    drawee    can    be    otherwise 

sufficiently  identified  from  the  bill  it  is  sufficient, 
(b)  An  unaddressed  bill  accepted  or  a  bill  accepted, 
w^here  the  drawer  and  acceptor  are  one  and  the 
same  person,  probably  is  to  be  treated  as  a  prom- 
issory note,  and  is  negotiable. 

31.  The  bill  or  note  must  point  out  some  person  to 
w^hom  the  money  is  to  be  paid. 

The  following  are  the  common  rules  concerning  the 
nomination  of  payees: 

(a)  The  payee  of  an  instrument,  except  one  payable 

to  bearer,  must  be  a  person  in  being,  natural  or 
legal,  and  ascertained,  at  the  time  of  issue. 

(b)  Where   the   payee   and   maker   or  draw^er  are  the 

same  person,  the  instrument  is  not  issued  until 
after  its  indorsement  and  delivery. 

(c)  The  payee  may  be  a  fictitious  or  nonexisting  per- 

son, but  the  instrument  is  then  construed  as  pay- 
able to  bearer,  and  title  thereto  is  made  by  es- 
toppel. 

D-eJinition  of  Parties. 

In  the  acceptation  of  the  term  as  hereinafter  applied  to  "parties," 
the  meaning  of  the  word  "parties"  is  somewhat  more  narrow  than 
its  strict  legal  one.     In  its  strict  legal  definition  a  party  to  a  con- 


68  OF    NEGOTIABLE    BILLS    AND    NOTES.  [Ch.   2 

tract  is  one  to  whom  its  operation  as  a  legal  contract  is  confined. 
And  while  the  holder  of  a  bill  or  note  indorsed  in  blank,  or  made 
payable  to  bearer,  or  claiming  it  under  equitable  assignment,  is 
in  the  widest  sense  of  the  word  no  less  a  party  to  it  than  any  of  its 
actual  indorsers,  still  the  courts  usually  designate  as  "pai'ties"  anly 
those  who  appear  by  name  on  the  face  or  back  of  the  insti'ument 

Signature  of  Parties, 

A  person  is  made  a  party  by  his  signifying  by  his  signature  or 
some  other  written  emblem  upon  the  instrument  that  he  intends  to 
be  bound  by  the  instrument.  A  signature  in  pencil, ^^*  a  signature 
made  by  another  person  but  attested  by  a  mark,^^^  an  indorsement 
upon  the  back  of  the  note  in  form  "7,  2,  8,"  made  with  the  intention 
of  indorsing,^^*  are  such  evidences  of  intention.  The  question  is 
whether  the  signer  intended  to  bind  himself  or  not^^^  As  matter 
of  theory  and  of  law,  and  for  the  reason  that  the  note  being  an  evi- 
dence of  obligation  should  point  out  on  its  face  the  party  who 
primarily  assumes  that  obligation,  it  is  necessary  that  there  should 
be  a  drawer  or  maker  somewhere  specified  in  the  instrument.  But 
as  long  as  the  signature  or  emblem  of  the  drawer  or  maker  appears 
anywhere  upon  the  instrument  it  is  deemed  prima  facie  evidence 
of  his  intention  to  be  bound  by  its  obligation.^  ^^     It  is  immaterial 

ii«  Geary  v.  Physic,  5  Barn.  &  C.  234;  Reed  v.  Koark,  14  Tex.  329;  Baker 
V.  Dening,  8  Adol.  &  E.  94. 

117  George  v.  Surrey,  Moody  &  M.  516;   Shank  v.  Butsch,  28  Ind.  19. 

118  Brown  v.  Butchers'  &  Drovers'  Bank,  6  Hill,  443. 

119  Selby  V.  Selby,  3  Mer.  2;  Lucas  v.  James,  7  Hare,  419;  Boardman  v. 
Spooner,  13  Allen,  353;    Bray  ley  v.  Kelly,  25  Minn.  160. 

120  Palmer  v.  Stephens,  1  Denio,  471;  Merchants'  Bank  v.  Spicer,  G  Wend. 
443.  The  payment  by  the  drawee  of  a  bill  of  exchange  is  an  admission  of 
the  drawer's  signature,  which  he  may  not  afterwards  dispute,  as  between 
himself  and  the  holder;  and  he  cannot  compel  the  holder  to  whom  he  has 
paid  the  bill  to  return  the  sum  paid,  where  the  drawer's  signature  is  discov- 
ered to  be  a  forgery.  Bank  of  Commerce  v.  Union  Bank,  3  N.  Y.  230;  Price 
V.  Neal,  3  Burrows,  1354.  Such  payment,  however,  is  not  an  admission  of 
the  genuineness  of  the  body  of  the  bill.  Bank  of  Commerce  v.  Union  Bank, 
supra.  As  to  the  effect  of  a  signature  made  In  the  presence  of  the  owner, 
and  by  his  authority,  see  Sager  v.  Tupper,  42  Mich.  605,  4  N.  W.  555;  Coy 
v.  Stiner,  53  Mich.  42,  18  N.  W,  552,  As  to  the  effect  of  acknowledging  a 
forged  signature,  see  Phillips  v.  Ford,  9  Pick.  39;  Wellington  y.  Jackson,  121 
Mass.  157. 


Ch.    2]  SPECIFICATION    OF    PARTIES.  5& 

in  what  part  of  the  instrument  the  name  appears,  whether  at  the 
top,  in  the  middle,  or  at  the  bottom.^ ^^  Anything  from  which  it 
will  appear  that  a  person  intended  to  make  the  instrument  his  own 
is  suflQcient.^^- 

Certainty  as  to  Parties. 

The  instrument  bearing  upon  its  face  means  of  identifying  the 
parties  to  it,  it  must  further  appear  that  these  parties  are  capable 
of  exact  ascertainment,  otherwise  the  instrument  is  non-negoti- 
able. In  Gibson  v.  Minet,^23  Qi^^^f  Baron  Eyre  declared:  "If  1 
put  in  writing  these  words:  *I  promise  to  pay  £500  on  demand, 
value  received,'  without  saying  to  whom,  it  is  waste  paper.  If 
I  direct  another  to  pay  £500  at  some  day  after  date,  for  value 
received,  and  not  say  to  whom,  it  is  waste  paper."  ^^*  But  it  is 
probable  that  this  restriction  is  limited  to  the  negotiability  of 
the  paper.  This  is  because,  under  the  law  merchant,  a  negotiable 
instrument  must  show  from  its  inspection  the  parties  to  it,  except 
where  it  is  made  payable  to  bearer.  Such  is  the  clear  import  of 
the  doctrine  laid  down  in  Evertson  v.  National  Bank  of  Newport,^  ^* 
where  certain  warrants  in  form:  "$35.  Interest  Warrant  for 
Thirty-Five  Dollars.  |35.00  upon  bond  No.  [filled  in  with  ink]  of 
Danville  R.  R.  Co.,  payable  in  gold  coin  at  the  office  of  the  Farmers' 
Loan  &  Trust  Co.,"  and  duly  signed,  were  held  non-negotiable,, 
because,  as  the  court  of  appeals  said,  the  statute  embodies  the  law,^ 
and  determines  what  instruments  shall  be  negotiable;  and  the 
court  seems  to  imply  that,  except  in  the  case  of  giving  the  instru- 
ment a  transferable  quality,*  even  though  it  be  the  intent  of  the 
parties  to  make  the  instrument  negotiable,  still  they  cannot  do  so 

121  Clason  V.  Bailey,  14  Johns.  485;  Saunderson  v.  Jackson,  2  Bos.  &  P. 
238;   Welford  v.  Beazely,  3  Atk.  503. 

122  In  the  case  of  Taylor  v.  Dobbins,  it  was  held  that  the  allegation  that 
the  note  was  that  of  the  defendant,  and  that  "manu  sua  propria  scripsit" 
was  sufficient  without  his  signature  at  the  end,  since  his  name  appeared 
In  the  instrument.     1  Strange,  399. 

123  1  H.  Bl.  G18. 

i24Walrad  v.  Petrie,  4  Wend.  576;    Ferris  v.  Bond,  4  Barn.  &  Aid.  679; 
Douglass  V.  Wilkeson,  6  Wend.  637;   Heman  v.  Francisco,  12  Mo.  App.  560. 
128  66  N.  Y.  15,  19. 
♦  See  supra,  §  9. 


60  OF   NEGOTIABLE    BILLS    AND    NOTES.  [Ch.   2 

where  the  statute  in  other  respects  has  not  in  words  invested  the 
form  of  instrument  with  the  quality  of  negotiability  which  always 
depends  upon  the  terms  of  the  instrument  itself,  and  not  the  intent 
of  the  parties. 

These  cases,  it  is  hoped,  show  the  general  rule  that,  where  the 
parties  are  indefinite,  the  negotiability  of  the  instrument  is  de- 
stroyed. The  elementary  decisions  go  further  than  this  where 
any  of  the  parties  necessary  to  the  creation  of  the  instrument  fail 
to  appear  upon  it.  Without  a  maker  to  a  promissory  note,  or  a 
drawer  to  a  bill  of  exchange,  the  instrument  is  inoperative.^*'  In 
McCall  V.  Taylor  ^^^  an  unsigned  instrument  was  said  to  be  an  in- 
choate instrument,  by  which  was  meant  that  some  one  should  have 
signed  it  to  set  it  in  circulation.  This  doctrine  is  limited  by  a 
principle  sometimes  found  that,  if  a  bill  be  drawn  without  the 
drawer's  signature  formally  accepted,  and  then  delivered  to  a  cred- 
itor, a  right  will  prima  facie  be  presumed  in  the  creditor  to  insert 
his  own  name  as  drawer,  and  treat  the  bill  as  a  valid  one.  This  is 
because  the  issuing  of  the  acceptance  can  only  mean  that  the  ac- 
ceptor intended  to  put  it  in  the  power  of  any  person  to  whom  he 
gave  it  to  fill  it  up,  or,  in  other  words,  to  have  intended  the  natural 
consequence  of  his  act.  It  is  immaterial  whether  the  acceptor 
issues  the  bill  to  the  person  who  drew  the  bill  or  not.  It  is  pre- 
sumed that  the  bill  was  given  with  the  intention  of  putting  it  into 
circulation,  and,  until  it  is  shown  that  such  was  not  the  fact,  the 
courts  will  maintain  that  presumption.^** 

126  Vyse  v.  Clarke.  5  Car.  &  P.  403;  May  v.  Miller,  27  Ala.  515;  Tevis  v. 
Young,  1  Mete.  (Ky.)  197;  Reg.  v.  Harper,  13  Cent.  Law  J.  174;  Stoessiger 
V.  South  E.  Ry.  Co.,  3  El.  &.  Bl.  549,  23  Law  J.  Q.  B.  293. 

127  34  Law  J.  C.  P.  365.  In  this  case,  a  note  was  written  in  this  form:  "Four 
months  after  date,  pay  to  my  order  the  sum  of  three  hundred  pounds  for  value 
received.  To  A.  B."  There  was  neither  date  nor  signature  of  drawer,  but 
the  name  of  the  defendant  was  across  its  face.  It  was  held  that  this 
<:ould  not  be  sued  on  as  a  bill  or  note,  since  it  was  an  incomplete  instru- 
ment. 

izsHai-vey  v.  Cane,  34  Law  T.  (N.  S.)  64.  In  this  case  the  bill  without  the 
name  of  the  drawer  was  accepted  by  the  defendant,  and  given  by  him  to 
O.,  by  whom  it  was  given  to  the  plaintiff,  who  inserted  his  own  name.  It 
was  held  that  the  acceptance  was  with  a  view  to  negotiation  and  that  C.  gave 
what  authority  he  had,  to  the  plaintiff.  See  Moiese  v.  Knapp,  30  Ga.  942; 
Hopps  V.  Savage,  09  Md.  516,  16  All.  133. 


Gh.   2 J  SPECIFICATION    OF   PARTIES.  61 

Designation  of  Drawee. 

So,  also,  the  elementary  principle  is  that,  without  a  drawee,  the 
iirStrument  cannot  be  treated  as  a  valid  one.^^"  It  is  not  a  bill  of 
exchange.  The  reason  for  this  is  that  the  first  essential  of  a 
bill  is  an  order,  and,  a  drawee  not  being  nominated,  the  instru- 
ment must  fail.  It  is  inherent  in  its  nature  that  there  must  be 
a  drawee,  who  in  theory  has  funds  of  the  drawer,  which  he  is 
bound  to  apply  upon  the  draft.  The  courts,  however,  have  lim- 
ited this  principle  wherever  it  was  consistent  with  common  sense 
to  do  so.  Their  idea  appears  to  have  been  that,  if  there  was  an 
actual  obligation  to  enforce,  they  would  enforce  it  despite  technical 
inaccuracies.  Hence  the  courts  have  taken  any  reason  to  support 
the  instrument  as  an  obligation,  rather  than  let  it  fall  to  the  ground. 
In  Peto  V.  Reynolds  ^^°  Barons  Parke  and  Alderson  both  agree  that 
if  the  instrument,  which  was  unaddressed,  could  be  shown  to  be  evi- 
dence of  an  obligation,  then,  while  they  could  not  treat  it  as  a  bill, 
because  of  the  absence  of  the  drawee's  name,  they  would  hold 
it  to  be  a  promissory  note.  This  is  the  principle  found  in  Block  v. 
Bell,^^^  where  the  word  "Accepted,"  over  a  signature,  written  across 
an  instrument  which  has  the  form  of  a  demand  promissory  note, 
is  construed  as  such  an  indorsement  of  the  obligation  intended  to 
be  evidenced  by  the  invalid  instrument  that  it  is  equivalent  to  a 
promise  to  pay  it.  And  the  courts  go  so  far  as  to  say  that,  if 
the  drawee  be  not  specified  in  the  bill,  but  otherwise  capable  of 
identification  from  it,  that  will  suffice.  In  Gray  v.  Milner,^^^  the 
bill  was  addressed,  "Payable  at  No.  1  Wilmot  St.,  opposite  the  Court 
Bethnal  Green,  London,"  and  the  argument  was  that,  not  being 
addressed  to  any  one,  it  was  not  a  bill  of  exchange.  It  appeared, 
however,  in  answer  to  this,  that  "Accepted.  Chas.  Milner"  was 
written  across  the  face  of  the  bill.     The  court  found  that  this  was 

129  An  action  was  brought  on  the  following  writing:  "Oct.  21,  1804.  Two 
months  after  date,  pay  to  the  order  of  John  Jenkins  £78,  lis.,  value  receiv- 
ed. Thos.  Stephens.  At  Messi-s.  John  Morson  &  Co."  It  was  held  that  the 
Instrument  was  a  bill  of  exchange,  and  that  Morson  &  Co.  could  be  consid- 
ered the  drawees.    Shuttlewoi*th  v.  Stephens,  1  Camp.  407. 

130  9  Exch.  410. 

181 1  Moody  &  R.  149. 
132  8  Taunt.  739. 


62  OF    .NEGOTIABLE    BILLS    AND    NOTES.  [Ch.   2 

the  only  person  who  could  have  been  meant,  because  Milner  had 
himself  acknowledged  his  liability  by  writing  his  acceptance  on 
the  bill.  Of  Gray  v.  Milner  it  may  be  said  that  it  can  only  be  sup- 
ported upon  the  theory  that  a  bill  of  exchange  made  pa^'able  at  a 
particular  place  of  residence  or  of  business  can  only  be  meant 
to  be  addressed  to  the  person  who  resides  or  does  business  at  that 
place.  But  it  may  also  be  said  that  such  is  certainly  a  very  strained 
construction  of  the  law,^^^  and  it  is  to  be  questioned  whether  the 
courts  would  to-day  adopt  such  a  view  of  this  rule  if  the  case  were 
presented  to  them  afresh.^^*  It  would  seem,  rather,  subject  to 
the  rule  of  interpretation  governing  ambiguous  instruments,  that 
its  acceptance  must  evidence  an  intention  to  have  incurred  an  ob- 
ligation, and  since  it  did  not  fulfill  the  requisites  of  a  bill  of  ex- 
change, the  holder  might  treat  it  as  a  promissory  note,^^**  and  the 
courts  would  perhaps  give  it  effect  as  such.  The  principle  is  the 
same  where  the  drawer  and  drawee  are  ostensibly  different,  though 
in  law  the  same  person.  In  Fairchild  v.  Ogdensburgh  R.  Co.,^^'  the 
instrument  was  an  order  drawn  by  the  president  of  the  railroad 
upon  its  treasurer  directing  the  latter  to  pay  A  B,  or  order,  a  cer- 
tain sum  of  money,  and  was,  in  effect,  an  order  of  the  corporation 
upon  itself.  Here  the  court  of  appeals  said,  because  there  were  not 
the  two  parties  requisite  for  a  bill  of  exchange,  the  instrument  was 
not  a  bill  of  exchange,  but,  following  the  authority  of  the  English 
courts,  that  it  was  a  promissory  note. 

Designation  of  Payee. 

Another  elementary  principle  of  the  form  of  a  negotiable  instru- 
ment is  that  the  payee  must  be  definitely  ascertained.^*^     By  this 

133  Davis  V.  Clarke,  6  Q.  B.  16;  Story,  Bills  (Bennett's  Ed.)  58;  1  Pars. 
Notes  &  B.  r.2. 

134  Ball  v.  Allen,  15  Mass.  435;   Watrous  v.  Halbrook,  39  Tex.  572. 

13  5  Edis  V.  Bury,  6  Barn.  &  C.  433;  Block  v.  Bell,  1  Moody  &  R.  149; 
Drummond  v.  Drummond,  reported  in  1  Ames,  Bills  &  N.  p.  SS3,  though  see, 
contra,  Stublteworth  v.  Stephens,  1  Camp.  407;  Allan  v.  Mawson,  4  Camp 
115;    Rex  v.  Hunter,  Russ.  &  R.  511. 

136  15  N.  Y.  337. 

137  Tittle  V.  Thomas,  30  Miss.  125;  Bennington  v.  Diusraore,  2  Gill.  34S; 
Rich  V.  Starbuck,  51  Ind.  87;  Stoi-m  v.  Stirling,  3  El.  &  Bl.  832;  Adams  v. 
King,  16  111.  169;  Gray  v.  Bowden,  23  Pick.  (Mass.)  282;  Osgood  v.  Pear- 
sous,  4  Gray  (Mass.)  455;   Noxon  v.  Smith,  127  Mass.  4So.     A  bill  drawn  by 


Ch.    2]  SPECIFICATION    OF    PARTIES.  63 

seems  to  be  meant  that  the  payee  must  have  some  identity.  And 
the  test,  where  any  payee  is  attempted  to  be  specified,  is,  does  the 
instrument  by  any  construction  point  out  as  payee  some  person, 
natural  or  legal,  with  whom  a  contract  can  be  deemed  to  have 
been  made,  and  by  whom  it  can  be  enforced.  In  the  note,  "I  prom- 
ise to  pay  the  estate  of  Moses  Lyon,  deceased,"  ^^^  while  there  was 
a  pajee  attempted  to  be  specified,  still  there  was  no  such  person, 
natural  or  legal,  in  existence.  It  could  not  be  Moses  Lyon.  It 
might  be  his  executor  or  representative,  it  might  be  his  heir,  and 
the  court  would  not  and  could  not  fix  upon  which  it  was,  where 
neither  was  specified.  Like  this  last  case,  and  perhaps  more  clear 
in  its  application,  is  the  one  usually  quoted  as  the  leading  one  on 
this  point,^^*  where  a  note  was  made  payable  nine  months  after 
date  "to  the  secretary  for  the  time  being  of  a  certain  society."     This 

a  specified  party,  and  payable  to  or  order,  ^\as  held  not  to  be  a  bill 

of  exchange,  by  reason  of  the  lack  of  a  payee.  Kex  v.  Randall,  Russ.  & 
R.  195.  In  Knight  v.  Jones,  the  promise  to  pay  a  certain  person  or  heirs 
was  held  sufficiently  certain  as  to  payee.  21  Mich.  1(31.  An  order  to  "pay 
to  your  order"  was  held  not  a  bill  of  exchange,  although  accepted  by  drawee, 
since  there  was  not  sufficient  certainty  as  to  payee.  "It  was  nothing  more  than 
a  request  to  a  man  to  pay  himself,  and  the  acceptance  *  *  *  laid  the 
acceptor  under  no  obligation  to  a  third  party."  Reg.  v.  Bartlett,  2  Moody 
&  R.  362.  It  was  held  in  Cruchley  v.  Clarance  that  the  issuing  a  bill  in 
blank,  without  the  name  of  the  payee,  was  an  authority  to  a  bona  fide 
holder  to  insert  the  name.  2  Maule  &  S.  90.  A  note  being  made  "payable  to 
one  or  the  other  of  two  parties,  it  is  payable  to  either  only  on  the  contin- 
gency of  its  not  having  been  paid  to  the  other,  and  so  is  not  a  good  pi-om- 
issory.  note,  under  the  statute."  Abbott,  C.  J.,  iu  Blanckeuhagen  v.  Blun- 
•dell,  2  Barn  &  Aid.  417.  In  the  case  of  Fisher  v.  Pomfret  it  was  held  by 
the  court  that  a  bill  of  exchange  to  a  man  and  his  order  is  one  and  the 
same  with  one  payable  to  his  order  only.  12  Mod.  125.  In  Com.  v.  Dal- 
linger  it  was  held  that  an  agi-eeuient  to  pay  to  the  order  of  the  maker  was 
a  good  promissory  note,  when  indorsed  by  the  maker.     118  JNIass.  439. 

188  Hendricks  v.  Thornton,  45  Ala.  309;  Shaw  v.  Smith  (Mass.)  22  N.  E. 
S87;  Lyon  v.  Marshall,  11  Barb.  242.  But  good  if  payable  to  administrators 
of  A,  deceased,  Adams  v.  King,  16  HI.  109;  Moody  v.  Threkeld,  13  Ga.  55;  or 
to  trustees  of  the  will  of  A,  Meggiuson  v.  Harper,  2  Cromp.  &  M.  322;  or 
the  heirs  of  A,  Bacon  v.  Fitch,  1  Root,  181;   because  payee  is  ascertainable. 

i8»  Cowie  V.  Stirling,  6  El.  &  Bl.  333.  As  distinguished  from  this  deci- 
sion, in  the  case  of  Holmes  v.  Jaques,  upon  a  promise  to  pay  "trustees  or  their 
secretary  for  the  time  being,"  the  secretary  was  held  to  be  merely  the 
agent,  and  not  as  acting  in  an  iudeiiendent  capacity,  and  the  promise  was 


64  OF    NEGOTIABLE    BILLS    AND    NOTES.  [Ch.   2 

was  a  promise  to  pay  some  one  whom  the  maker  did  not  know,  and 
who  might  be  secretary  of  the  society  nine  months  hence.  And 
clearly,  there  was  no  party  with  an  assenting  mind  to  be  a  party 
to  a  contract. 

It  will  perhaps  illustrate  this  idea  to  show  in  contrast  instruments 
very  similar  in  language  but  widely  different  in  principle.  In  con- 
trast to  a  promise  to  pay  the  secretary  for  the  time  being  is  the 
promise  in  Davis  v.  Garr.^**  There  the  promise  was  to  pay  certain 
persons  designated  as  the  "trustees  or  their  successors  in  office." 
This  was  held  to  constitute  a  good  promissory  note,  because  there 
was  a  perfected  contract  with  definite  persons.  The  mere  fact  that 
the  rights  of  these  persons  were  entailed  upon  their  legal  suc- 
cessors did  not  vitiate  the  contract,  for  all  contract  rights  devolve 
and  are  assignable.  So,  in  contrast  to  a  promise  to  pay  A  or  B, 
the  promise  "to  pay  A,  B,  «&  C,  or  to  their  order,  or  the  major  part  of 
them,"  ^*^  is  good  as  a  promissory  note,  because  there  was  a  joint 
interest  in  the  parties,  who,  taken  together,  constituted  a  distinct 
legal  entity,  or  one  person  in  view  of  law. 

Payment  to  Order  of  Maker  or  Drawer  or  Fictitious  Person, 

There  is  another  aspect  of  the  payee  as  a  party  to  the  instrument 
which  should  be  noticed.  It  is  when  the  instrument  is  drawn 
payable  to  the  order  of  the  maker  or  drawer  or  of  a  fictitious  per- 
son. In  Hooper  v.  Williams,^^-  the  court  explained  that  notes  pay- 
able to  the  maker's  order  were  incomplete  instruments,  and  had  no 
binding  effect  until  indorsed.  No  right  to  sue  could  exist  in  any 
one  in  case  of  such  a  note  until  the  order  was  made  in  the  shape 
of  an  indorsement.  Until  that  indorsement  was  made  it  was  an 
imperfect  instrument,  and  in  truth  not  a  promissory  note  at  all. 
It  was  perfected  by  an  indorsement  to  another  person,  because  the 
original  writing  and  indorsement,  taken  together,  became  a  binding 
contract,  though  an  informal  one,  between  the  maker  and  the  in- 
dorsee.    In  case  of  a  bill  of  exchange  or  note  made  payable  to  the 


held  to  be  good,  since  there  was  no  uncertainty  as  to  payee.     L.  R.  1  Q,  R 
376. 

140  6  N.  Y.  124;  Porter  v.  City  of  Janesville,  3  Fed.  619. 

1*1  Watson  V.  Evans,  1  HurL  &,  C.  UG2. 

14  2  2  Exch.  IS. 


Ch.    2]  SPECIFICATION    OF    PARTIKS.  65 

order  of  a  fictitious  person,  Lord  Ellenborough  ^*^  is  supposed  to 
have  held  that  such  a  bill  was  neither  in  effect  payable  to  the  order 
of  the  drawer  nor  to  bearer,  but  was  completely  void.  This  rule, 
however,  he  afterwards  qualified  by  the  statement:  "Unless  it  can 
be  shown  that  the  circumstance  of  the  payee  being  a  fictitious  per- 
son was  known  to  the  acceptor."  He  thus  made  the  acceptor  liable 
by  estoppel,  and  this  is  probably  the  present  attitude  of  the  courts. 
In  New  York  this  doctrine  is  changed  by  statute  to  the  effect  that  a 
note  "made  payable  to  the  order  of  the  maker  thereof,  or  to  the 
order  of  a  fictitious  person,  shall,  if  negotiated  by  the  maker,  have 
the  same  effect  and  be  of  the  same  validity,  as  against  the  maker 
and  all  persons  having  knowledge  of  the  facts,  as  if  payable  to  the 
bearer."  ^**  This  statute,  the  wise  spirit  of  which  has  been  followed 
in  other  jurisdictions,^"'"  is  extended  in  New  York  in  its  operation. 
In  Mechanics'  Bank  v.  Straiten  ^*®  the  check  in  suit  was  demurred 
to  because  it  was  in  form:  "Pay  to  bills  payable,  or  order."  It 
was  declared  by  the  general  term  of  the  supreme  court  to  be  non- 
negotiable,  but  the  court  of  appeals  said  that  by  using  the  words 
"or  order"  the  maker  showed  he  intended  that  the  instrument 
should  be  transferred,  and  be  negotiable.  In  naming  the  persons 
to  whose  order  the  instrument  is  payable  the  maker  limits  the 
negotiability  to  those  persons,  and  imposes  the  condition  of  indorse- 
ment upon  them  upon  its  first  transfer.  But  no  such  intention  is 
indicated  by  a  fictitious  or  an  impersonal  payee;  hence  words  of 
negotiability,  in  such  connection,  are  capable  of  no  reasonable  in- 
terpretation except  that  the  bill  shall  be  negotiable  without  indorse- 
ment. In  other  words,  it  is  to  be  treated  in  the  same  manner  as  if 
it  had  been  made  payable  to  bearer.  In  Irving  Nat.  Bank  v. 
Alley  ^*^  the  court  goes  further.  It  holds  that,  even  where  a  party 
upon  a  note  of  this  character,  against  whom  a  liability  is  sought  to 
be  enforced,  does  not  have  knowledge  of  the  facts,  in  all  other  cases 
than  that  of  the  fictitious  payee,  he  cannot  raise  the  point  that  it 

143  Bennett  v.  Farnell,  1  Camp.  130. 

144  Rev.  St.  N.  Y.  p.  2499,  §  5;    Plets  v.  Johnson,  3  Hill,  112. 

145  Foster  v.  Shattuck,  2  N.  H.  44a 

146  3  Abb.  Dec.  2G9. 
14T  79  N.  Y.  53G. 

N EG.  BILLS 5 


66  OF    NEGOTIABLE    BILLS    AND    NOTES.  [Cll.    2 

was  payable  to  the  maker's  or  drawer's  order,  but  will  be  estopped 
from  doing  so.  Thus  tlio  old  common  law  is  substantially  changed, 
and  a  wiser  and  more  equitable  one  would  probably  now  prevail.^** 


CAPACITY  OF  PARTIES. 

32.  The  capacity  of  parties  is  in  general  governed  by 
the  same  rules  as  their  po"V7er  to  make  a  contract.  It  is 
of  tw^o  kinds: 

(a)  Capacity  to  incur  liability. 

(b)  Capacity  to  transfer  the  instrument. 

33.  The  following  classes  of  persons  incur  no  liability, 
though  they  may  make  a  valid  transfer  of  the  instrument: 

(a)  A  person  non  compos  mentis. ^^ 

(b)  An  infant.  i^« 

(c)  In  some  jurisdictions,  a  married  ■woman."^ 

(d)  A  corporation,  when  the  act  is  ultra  vires. ^'^ 

34.  The  following  persons  may  transfer,  but  are  bound 
personally  by  the  transfer: 

(a)  Executors. 

(b)  Administrators. 

(c)  Guardians. 

(d)  Trustees. 

(e)  An  agent  for  a  principal,  whether  disclosed  or  un- 

disclosed. 

The  generic  principles  governing  the  capacity  of  parties  to  con- 
tracts are  not  changed  in  their  application  to  bills  and  notes.  A 
full  discussion  of  that  liability  belongs  more  properly  to  a  work  up- 
on the  general  subject  of  contracts  than  to  a  work  of  this  character. 

148  Famsworth  v.  Drake,  11  Ind.  101;    Forbes  v.  Espy,  21  Ohio  St.  474; 
Lane  v.  Krekle,  22  Iowa,  399. 
»4»  See  post,  §  98,  pp.  216-223,  note. 
3  50  See  post,  §  94,  pp.  20S-210. 
151  See  post,  §  95,  pp.  210,  211. 
» 62  See  post,  §  96,  pp.  211-216. 


Ch.    2]  CAPACITY    OF    PARTIES.  67 

The  defenses  of  persons  non  corapos  mentis,  infancy,  coverture,  and 
of  transcending  corporate  powers,  and  their  effect  upon  the  position 
of  the  bona  fide  holder,  will  be  considered  to  a  limited  degree  later 
on.  We  speak  here  in  a  most  general  way  of  persons  acting  in  a 
representative  capacity  as  parties  to  negotiable  paper. 

Eixecutors,  administrators,  guardians,  and  trustees  occupy  at 
least  one  general  property  relation  in  common:  an  estate  is  com- 
mitted to  them  to  apply.  An  executor  or  administrator  is  the 
hand  of  the  court  to  collect  property  and  pay  debts.  A  guardian 
or  trustee  has,  in  addition  to  these  functions,  to  hold  property,  and 
to  keep  it  intact  as  far  as  in  ordinary  human  prudence  it  can  be 
done.  They  hold  this  property,  as  the  law  phrases  it,  in  "autre 
droit,"  w^hich  means  that  they  hold  for  others,  and  not  in  their  own 
right.  They  are  allowed  by  law  to  charge  the  estates  left  in  their 
care  with  certain  disbursements,  which,  in  general,  are  those  neces- 
sary to  carry  into  force  and  effect  the  estates  which  they  are  to  ad- 
minister. But,  aside  from  these,  the  estate  cannot  be  bound.  It 
cannot,  for  example,  be  bound  by  an  executory  contract.  If  the 
representative  makes  such  a  contract,  the  law,  in  order  that  the 
obligation  may  stand,  rather  than  fall,  holds  the  representative  per- 
sonally responsible,  not  the  estate  which  he  represents.  Thus  in 
the  case  of  the  executory  contract  of  negotiable  paper,  the  law 
deems  the  descriptive  character  setting  forth  the  representative 
character  in  which  the  party  has  signed  as  surplusage,  and  treats  it 
as  his  personal  obligation.^ °^  This  principle  is  extended  so  far 
that  an  executor  is  not  permitted  to  charge  the  estate,  although  he 
is  expressly  authorized  to  do  so  by  the  terms  of  the  will  under  which 
he  acts.^°*  This,  however,  does  not  preclude  the  power  of  transfer. 
If  a  bill  or  note  be  negotiable,  it  may  be  indorsed,  but  the  executor, 

103  See  Willis  v.  Sharp,  113  N.  Y.  586,  21  N.  E.  705.  The  main  cases  on 
this  point  are  Austin  v.  Munro,  47  N.  Y.  300;  Ex  parte  Garland,  10  Ves. 
119;  Fairland  v.  Percy,  L.  R.  3  Prob.  &  Div.  217;  Labouchere  v.  Tupper,  11 
Moore,  P.  C.  198;  Downs  v.  Collins,  6  Hare,  418.  See,  also,  Thompson  v. 
Whitmarsh,  100  N.  Y.  3.j,  2  N.  E.  273. 

IB*  Delaware,  L.  &  W.  R.  Co.  v.  Gilbert,  44  Hun,  201.  Modified  by  Willis 
V.  Sharp,  113  N.  Y.  586,  21  N.  E.  705,  which  holds  that  where  a  will  directs 
an  executor  to  carry  on  business  the  funds  of  the  estate  in  the  business 
are  bound  in  equity  for  the  payment  of  debts.  It,  however,  admits  that  the 
executor  is  pei-sonally  liable  in  the  first  event. 


US  OF    NEGOTIABLE    BILLS    AND    NOTES.  [Ch.   2 

guardian,  or  trustee  indorsing  is  personally  liable  unless  he  exempts 
himself  by  an  indorsement  without  recourse.^ '^'' 

The  idea  underlying  this  is  the  same  with  regard  to  agents.  The 
principal  text  relates  to  cases  where  the  name  of  the  agent  appears 
upon  the  instrument,  and  that  of  the  principal  does  not,  or  where 
the  name  of  the  principal  appears  in  such  a  way  as  to  leave  it  doubt- 
ful who  was  the  party  to  the  bill;  for  if  the  bill  or  note  be  drawn 
or  indorsed  "A  B,  by  C  D,"  or  "A  B,  by  his  attorney,  C  D,"  it  appears 
clearly  that  A  B  was  the  party  to  the  instrument,  provided  G.  D. 
had  the  right  to  place  his  name  there.  So,  also,  "C  D,  for  A  B,"  or 
''C  D,  agent  for  A  B,"  is  a  term  usual  and  proper  to  create  an  agency; 
and  in  such  cases  A  B  would  be  bound.  It  would  seem  to  be  the 
safer  rule  that  no  party  can  be  charged  as  principal  upon  a  ne- 
gotiable instrument  unless  his  name  is  thereon  disclosed,^""  and 
that,  where  one  person  signs  or  indorses  an  instrument  in  his  own 
individual  name,  though  in  fact  as  an  agent  for  another,  all  evidence 
must  be  excluded  to  show  that  it  was  intended  at  the  time  of  the 
signing  to  bind  the  liability  upon  another.^^'^  The  reason  for  this 
is  that  a  negotiable  instrument  must  show  exactly  what  it  is  upon 
its  face,  in  order  to  be  a  negotiable  instrument  The  cases  adopting 
this  wise  rule  go  to  the  extent  of  saying  that  this  principle  applies 
even  though  it  was  known  that  the  signer  was  an  agent,  and  some- 
times it  is  in  fact  agreed  that  the  person  signing  shall  only  create 
a  liability  to  bind  some  other  person.  But  any  such  evidence 
clearly  contradicts  the  terms  of  a  written  instrument.  Hence,  in 
a  bill  made  by,  payable  to,  or  indorsed  by,  "J  S,  agent,"  the  word 
"agent"  is  surplusage,  and  J  S  is  personally  liable.  This  is  not  the 
law  in  some  of  the  states.  It  is  doubtful  whether  it  is  the  law  in 
New  York.     Such  authorities  as  Mott  v.  Hicks,^°®  Green  v.  Skeel,^^® 

IBB  Rex  V.  Thom,  1  Term  R.  487;  Cbilds  v.  Monins,  5  Moore,  282;  Harri- 
son v.  McClelland,  57  Ga.  531;  Tryon  v.  Oxiey,  3  G.  Greene,  289;  Davis  v. 
French,  20  Me.  21;    Wisdom  v.  Becker,  52  111.  346. 

156  Arnold  v.  Sprague,  34  Vt.  409;  Pease  v.  Pease,  35  Conn.  131;  Texas 
L.  &  T.  Co.  V.  Carroll,  63  Tex.  51;  Stackpole  v.  Arnold,  11  Mass.  27;  Hyde 
V.  Paige,  9  Barb.  150. 

157  Nash  V.  Towne.  5  Wall.  689. 
1B8  1  Cow.  540. 

iBO  2  Hun,  48G. 


Ch.    2]  DELIVKHY    OF    INSTKUMENTS.  69 

and  Moore  v.  McClure/''°  lay  down  a  different  doctrine.  It  appears 
to  have  been  the  sense  of  the  court  in  Mott  v.  Hicks  that  extrinsic 
testimony  might  be  admitted  to  show  that  where  an  indorser 
signed  his  name  as  agent  it  was  competent  to  show  that  it  was 
agreed  between  the  parties  that  such  indorsement  was  merely  for 
the  purpose  of  transfer,  and  that  the  indorser,  as  agent,  was  not 
personally  liable.  This  is  also  the  doctrine  in  Green  v.  Skeel, 
where  it  is  held  that  a  person  signing  his  name  as  agent  in  the  busi- 
ness of  his  agency  is  not  personally  liable.  On  the  other  hand, 
in  De  Witt  v.  Walton,^^^  the  addition  of  the  word  "agent"  is  treated 
as  mere  descriptio  personae,  and  this  is  emphasized  and  affirmed 
in  Pumpelly  v.  Phelps,^^^  and  in  a  dictum  in  Briggs  v.  Partridge  ^^^ 
this  is  further  approved. 


DELIVERY  OF  INSTRUMENTS. 

35.  An  undelivered  bill  or  note  is  inoperative,  because 
delivery  is  essential  to  the  final  completion  of  every  -writ- 
ten contract.     Until  delivery,  the  contract  is  revocable. 

36.  Delivery  means  transfer  of  possession  -with  intent  to 
transfer  title,  and  is  of  t-wo  kinds: 

(a)  The  manual  passing  of  the  instrument  itself. 

(b)  Some   act   manifesting  intent  to  transfer  right  of 

possession  while  the  possession  of  the  bill  is  actu- 
ally -with  another. 

37.  Escrow  means  a  delivery  of  a  bill  or  note  to  a  third 
person  to  hold  until  certain  events  happen,  or  certain  con- 
ditions are  complied  -with. 

160  8  Hun,  558.  See,  also,  May  v.  Hewitt,  33  Ala.  161.  In  the  case  of  a 
note  signed  in  Florence  and  delivered  in  London,  it  was  claimed  that  the 
cause  of  action  arose  in  the  former  place,  but  it  was  held  that  no  contract 
arose  until  its  delivery,  and  that  consequently  it  came  under  the  jurisdic- 
tion of  such  place  of  delivery.     Chapman  v.  Cottrell,  13  Wldy.   Rep.  843. 

1619  N.  Y.  571. 

162  40  N.  Y.  59. 

183  G4  N.  Y.  359,  at  page  3G3. 


70  OF    NEGOTIABLE    BILLS    AND    NOTES.  [Cll.    2 

The  inception  of  a  note  is  defined  by  Judge  Piatt  to  mean  "when 
it  was  first  given,  or  when  it  first  became  the  evidence  of  an  existing 
contract."^'*  It  has  no  legal  inception  until  it  is  delivered  as  evi- 
dence of  a  subsisting  debt.^"^  Merely  writing  and  signing  a  bill 
or  note,  and  retaining  it  in  the  hands  of  the  drawer  or  maker,  forms 
no  contract.^ °^  No  person  has  then  a  right  of  action  upon  it  any 
more  than  if  it  were  blank  paper.  The  inception  of  the  paper 
is  when  there  came  into  existence  a  right  of  action  upon  it.^'^  This 
is  because  while  the  note  or  bill  is  in  the  maker's  hands,  it  can  be 
erased,  canceled,  or  revoked.^®*  It  cannot,  therefore,  be  an  evi 
.dence  of  indebtedness  until  it  is  beyond  such  possibility.  The  de- 
cisive step  for  this  is  the  delivery.^*" 

Two  things  must  concur  in  a  delivery.  The  first  is  the  transfer 
of  the  possession  of  the  instrument,  the  second  an  intent  to  transfer 
the  title  on  the  part  of  the  transferer,  and  the  acceptance  of  the  in- 
strument by  the  transferee  with  intent  to  acquire  title  to  it.     The 

164  Marvin  v.  McCullnm.  20  Johns.  288. 

165  Delivery  is  essential  to  the  validity  of  a  bill  or  note.  Meeker  v. 
Shanks,  112  Ind.  207,  13  N.  E.  712,  Johns.  Cas.  Bills  &  N.  31.  "As  a  general 
rule,  a  promissory  note,  like  any  other  written  contract,  has  no  legal  incep- 
tion or  valid  existence,  as  such,  until  it  has  been  delivered  in  accordance 
with  the  purpose  and  intent  of  the  parties."  Burson  v.  Huntington,  21  Mich. 
416;  upon  point,  see,  also,  Chipman  v.  Tucker,  3S  Wis.  43;  Cline  v.  Guthrie, 
42  Ind.  227.  For  the  rule  in  regard  to  bank  bills  which  were  stolen  before 
issue,  although  signed,  see  Worcester  Co.  Bank  v.  Dorchester  &  Milton  Bank, 
10  Cush.  (Mass.)  488. 

166  Gale  v.  Miller,  54  N.  Y.  536;  Bayley  v.  Taber,  5  Mass.  286;  Freeman 
V.  Ellison,  37  Mich.  459;  Woodford  v.  Dorwin,  3  Vt.  82;  Ward  v.  Churn,  18 
Grat.  801;    Michigan  Ins.  Co.  v.  Leavenworth,  30  Vt.  11. 

167  Eastman  v.  Shaw.  65  N.  Y.  527.  528. 

168  Cox  V.  Troy,  5  Bam.  &  Aid.  474.  In  this  case  a  bill  was  presented  to 
the  defendant  as  drawee.  After  a  time  the  one  presenting  Jthe  bill  obtained 
it  from  him,  and  in  the  meantime  words  indicative  of  acceptance  had  been 
written  upon  the  instrument,  either  by  the  drawee,  or  by  his  authority, 
which  had  been  then  erased.  It  was  held  that  there  was  no  complete  ac- 
ceptance. "It  is  not  the  mere  act  of  writing  on  the  bill,  but  the  communi- 
cation of  what  is  so  written,  that  binds  the  acceptor."  Bayley,  J.  (concur- 
ring). 

160  Catlin  v.  Gunter,  11  N.  Y.  368;  Cowing  v.  Altman,  71  N.  Y.  435,  70 
N.  Y.  167;  Kinzie  v.  Farmers'  &  Mechanics'  Bank,  2  Doug.  (Mich.)  105;  Vin- 
ton V.  Peck,  14  Mich.  287. 


Ch.    2]  DELIVERY    OF    INSTRUMENTS.  71 

minds  of  both  parties  must  concur.  This  is  the  law  laid  down  ^""^ 
in  a  case  where  the  question  was  whether  a  checlc  for  $10,000  in  gold 
left  upon  a  clerk's  desk,  unknown  to  him,  and  without  his  conscious- 
ly accepting  it,  was  a  delivery  of  it,  and  the  court  said  it  was  not. 
And  in  a  case  where  ^''Mt  was  the  intention  to  deliver  the  instru- 
ment left  in  escrow  on  the  1st  of  May,  but  on  April  30th  the  trans- 
ferer died,  it  was  held  that  there  could  have  been  no  actual 
delivery  nor  intention  to  deliver  the  instrument.  The  necessary 
elements  to  a  delivery  were  wanting.  There  was  no  mutual  inten- 
tion of  both  parties  at  the  time  of  the  act  to  give  and  receive  title. 
One  party  may  have  intended  such  legal  act,  but  such  intention  on 
his  part  does  not  make  the  delivery  complete.  As  long  as  the  other 
party  had  no  such  intention,  there  was  no  meeting  of  the  minds, 
and  therefore  no  contract.  The  time  of  delivery  is  the  time  at 
which,  in  the  view  of  the  law,  mind  so  meets  mind  that  the  legal  tie 
is  effected.  And  legal  delivery  once  made,  in  the  absence  of  fraud 
or  any  other  cause  which  in  law  destroys  and  nullifies  a  contract 
tie,  the  contract  cannot  be  revoked,  because  the  legal  estate  is  then, 
once  for  all,  established.  The  outward  and  visible  indication  of 
delivery  is  possession,  because,  in  nine  cases  out  of  ten,  where  a 
man  holds  paper  he  has  a  right  to  hold  it.  And  the  courts  have  con- 
firmed this  business  view  accordingly,  declaring  that,  when  a  bill 
or  note  is  found  in  the  hands  of  a  payee  or  person  claiming  it,  it 
will  be  presumed  that  it  was  legally  delivered  to  him,  and  was  in 
fact  his.^''^  But  this  presumption,  of  course,  like  every  other,  is 
a  mere  rule  of  evidence,  and  may  be  rebutted.^ ^^  For  delivery  of 
a  negotiable  instrument  is,  in  case  of  dispute,  a  question  of  fact,  to 
be  determined,  subject  to  the  presumption  above  mentioned,  by  ref- 
erence to  surrounding  circumstances.  Negotiable  instruments  dif- 
fer in  this  respect  from  deeds  and  sealed  instruments,  which  if  deliv- 
ered to  the  grantee  or  person  entitled  to  take  under  them,  become 

iTo  Kinne  v.  Ford,  52  Barb.  196,  affirmed  43  N.  Y.  5S7. 

171  Artcher  v.  Wbalen,  1  Wend.  179. 

1T2  Griswold  v.  Davis,  31  Vt.  390;  Russell  v.  Whipple,  2  Cow.  536;  Peets 
V.  Bratt,  6  Barb.  662;  Cliappell  v.  Bissell,  10  How.  Trac.  274;  Marshall  v.' 
Rockwood,  12  How.  Prac.  452;  Keteltas  v.  Myers,  19  N.  Y.  231;  Cordier  v. 
Thompson,  S  Daly.  172. 

173  Scaife  v.  Byrd,  39  Ark.  56S;  Chandler  v.  Temple,  4  Cush.  285;  Rhine 
V.  Robinson,  27  Pa.  St.  30;    Roberts  v.  Jackson,  1  Wend.  478. 


72  OF    NEGOTIABLE    BILLS    AND    NOTES.  [Ch.   2 

absolute,  whatever  the  intention  of  the  parties  may  have  been."* 
The  possession  of  negotiable  instruments  and  all  other  instruments 
not  under  seal  may  be  transferred  to  the  party  to  whom,  upon 
their  face,  they  are  made  payable,  or  who  is,  by  their  terms,  entitled 
to  some  interest  or  benefit  under  them,  in  fact,  but  not  in  law,  or  by 
analogy  to  deed  upon  an  escrow,  or  upon  a  condition,  the  perform- 
ance of  which  is  necessary  in  order  to  perfect  the  title  of  the  holder, 
and  to  enable  him  to  enforce  the  contract"''     With  unsealed  in- 
struments, where  the  presumption  of  delivery  has  been  rebutted,  so 
far  as  the  immediate  parties  are  concerned,  there  must  be  given  evi- 
dence that  the  possession  of  the  instrument  was  acquired  either  by 
or  under  the  authority  of  the  party  drawing,  accepting,  or  indorsing 
j^  178     Thus,  for  example,  where  a  banker  indorsed  a  note,  and  put 
it  in  an  envelope  with  his  papers,  at  the  same  time  making  entries 
in  his  books,  on  his  bankruptcy  these  facts  were  deemed  sufficient 
evidence  of  an  intention  to  deliver  to  vest  title  as  against  the  as- 
signee."^     But  where  the  holder  of  a  bill  specially  indorsed  it, 
and  died  before  delivering  it,  it  was  held,  his  executor,  finding  it 
among  his  papers,  could  not  consummate  the  contract  by  hand- 
ing it  to  the  indorsee,  because  the  evidence  of  the  contracting  mind 
was  lacking."®      So,  also,  such  acts  as  receiving  executed  notes, 
and  retaining  them,  objecting  only  to  their  form,"*  or  depositing 
executed  notes  in  the  post  office,  properly  addressed,^®"  or  obtaining 
a  duplicate  bill,  instead  of  one  already  lost,  and  treating  it  as  an 
original,  are  construed  as  showing  intention  on  the  part  of  the 
person  bound  to  obligate  himself  by  treating  the  transfer  at  the 

IT 4  Arnold  v.  Patrick,  6  Paige,  310;    Worrall  v.  Munn,  5  N.  Y.  229. 

175  Miller  v.  Gamble,  4  Barb.  14G;    Seymour  v.  Cowing,  4  Abb.  Dec.  200. 

1T6  Bromage  v.  Lloyd,  1  Exch.  32;   In  re  Richards,  3G  Ch.  Div.  541. 

1T7  Williams  v.  Gait,  95  111.  172. 

17  8  Bromage  v.  Lloyd,  1  Exch.  32.  This  action  was  in  assumpsit  on  a 
note  in  writing,  made  by  defendants,  indorsed  to  the  plaintiffs  by  the 
payee,  and,  after  the  death  of  the  latter,  delivered  to  the  plaintiffs  by  the 
payee's  executrix,  without  her  indorsement.  It  was  held  that  those  to 
whom  the  note  was  so  delivei-ed  had  no  right  to  sue  upon  it,  for  a  "transfer" 
was  not  effected  thereby,  but  see  Giddings,  where  this  case  is  distinguished. 

170  Bodley  v.  Higgins,  73  111.  375. 

180  Rex  v.  Lambton,  5  Price,  428;  Kirkman  v.  Bank  of  America,  2  Cold. 
397. 


Ch.    2]  DELIVERY    OF    INSTRUMENTS.  73 

time  it  was  made  as  a  delivery.  As  we  sball  see  later,  if  the  in- 
strument be  in  the  hands  of  a  bona  fide  holder,  a  valid  delivery  of  it 
by  all  parties  who  are  prior  holders,  so  as  to  make  them  liable  to 
him,  is  presumed. 

Delivery  also  may  be  upon  conditions,  by  which  is  meant  that 
the  possession  of  an  instrument  may  be  shown  to  have  been  ac- 
quired by  the  holder  for  a  special  purpose  only,  and  that  the  de- 
livery was  not  made  to  him  for  the  purpose  of  transferring  the  title 
absolutely.^ ^^  Deliveries  upon  conditions  are  of  two  classes:  de- 
livery as  an  escrow,  and  delivery  to  the  other  party  to  the  instru- 
ment upon  a  condition.  An  escrow  is  defined  ^^^  as  a  delivery  to 
a  third  person,  made  to  await  some  affirmative  action  on  the  part  of 
the  other  party  before  he  is  entitled  to  the  absolute  delivery  of  the 
instrument,  as  distinguished  from  the  affirmative  action  of  the  party 
who  delivers  the  instrument  in  escrow.  The  authorities  agree  that 
a  delivery  in  escrow  has  two  elements:  It  must  be  to  some  person 
not  ultimately  entitled  to  receive  it;  and  the  delivery  must  take 
effect  and  the  title  to  the  instrument  pass  the  instant  the  condition 
of  the  escrow  is  fulfilled,  even  though  the  depositary  has  not  for- 
mally delivered  it  to  the  person  entitled  to  the  possession.^ ^^  In 
these  respects  it  is  like  the  escrow  of  a  deed,  from  the  analogy  of 
which  it  is  in  fact  drawn.  There  are,  however,  these  distinctions: 
A  deed  once  delivered  to  be  held  in  escrow  by  a  third  party,  and 
wrongly  passed  on  by  him,  is  subject  to  defenses,  even  in  the  hands 
of  a  purchaser  for  value  without  notice,  a  negotiable  instrument  is 
not.^^*  A  deed  being  delivered  conditionally  to  the  obligee,  parol 
evidence  that  it  was  conditional  is  admissible.  A  negotiable  instru- 
ment may  be  delivered  conditionally  for  a  special  purpose,  and  the 

181  Bell  V.  Ingestre,  12  Adol.  &  E.  (N.  S.)  319.  In  this  case  one  Edwards, 
having  drawn  bills  and  procured  acceptance  by  defendant,  indorsed  the 
bills,  and  sent  them  to  the  plaintiff,  with  which  he  was  to  take  up  overdue 
bills.  It  was  stipulated  as  an  express  condition  that  such  overdue  bills 
should  be  returned  to  him.  It  was  held  that  the  indorsement  was  incom- 
plete until  the  condition  precedent  had  been  fulfllled  by  the  return  of  the 
overdue  bills.    Benton  v.  Martin,  52  N.  Y.  574. 

182  Worth  v.  Case,  42  N.  Y.  3GT. 

183  Edw.  Bills  &  N.  §  243;  Daniel,  Neg.  Inst.  GS,  and  cases  cited;  Earl  v 
Peck,  64  N.  Y.  59G. 

184  Daniel,  Neg.  Inst.  §  G8.  ' 


74  OF    NEGOTIABLE    BILLS    AND    NOTES.  [Ch.   2 

relations  bet\\een  the  person  who  so  delivers  it  and  the  person  to 
whom  it  is  delivered  are  substantially  those  of  principal  and  agent 
or  principal  and  bailee.^®" 

A  delivery  upon  a  condition  is  where  the  instrument  is  delivered 
to  the  payee,  to  be  held  by  him  pending  some  future  event.  It  is 
explained  in  Juilliard  v.  Chaffee.^ ^®  There  Judge  Danforth  collates 
the  authorities,  and  deduces  the  rule  that  a  party  sued  by  his 
promisee  may  alwajs  show  that  the  instrument  was  delivered  to 
the  payee  to  take  effect  only  on  the  happening  of  some  future  event, 
or  that  its  design  and  object  were  different  from  the  effect  of  its 
language  if  taken  alone.^^^  In  that  case,  as  the  note  did  not  in- 
dicate all  the  agreement,  it  was  held  the  full  purpose  of  its  execu- 
tion might  be  shown.  So  in  Benton  v.  Martin,^®*  the  law  was  laid 
down  that  conditions  might  be  affixed  to  the  delivery  of  a  note 
in  the  hands  of  a  payee,  wliich,  as  between  the  immediate  parties, 
would  be  binding,  and  a  defense.  This  does  not  apply  to  the  bona 
fide  holder.^ 89 

DATE. 

38.  A  date  in  a  bill  or  note,  is  not  necessary  to  its 
validity. 

The  date  of  an  instrument  is  not  so  necessary  to  it  in  law,  that 
its  absence  avoids  the  instrument.  It  is  not  an  essential  charac- 
teristic of  the  instrument,  as  other  qualities  are  characteristic  of 
the  instrument  or  of  its  negotiability.  For  this  reason  the  date  may 
be  supplied  by  parol,^^"  the  date  of  delivery  being  the  day  of  date; 
or  it  may  be  antedated  or  postdated,^ "^  or,  if  the  date  be  left  blank, 

186  Couch  V.  Meeker,  2  Conn.  302;    Trutsman  v.  Baker,  30  Wis.  G44. 
.    186  92  N.  Y.  529. 

187  Seymour  v.  Cowing,  *40  N.  Y.  532;  Eastman  v.  Sliaw,  6.5  N.  Y.  522; 
Denton  v.  Peters,  L.  R.  5  Q.  B.  475;  Blossom  v.  Griffin,  13  N.  Y.  569;  Hutcli- 
ins  V.  Hebbard,  34  N.  Y.  24;  Barker  v.  Bradley,  42  X.  Y.  316;  Griersou  v. 
Mason,  60  N.  Y.  394;  Chapin  v.  Dobson,  78  N.  Y.  75;  Crosman  v.  Feller,  17 
Pick.  171. 

188  52  N.  Y.  570. 

189  See  §    93  et  seq.,  post.     Note,  also,  Bookstaver  v.  Jayne,  60  N.  Y.  146. 

190  Cowing  V.  Altman,  71  N.  Y.  441;    Davis  v.  .Tones,  25  Law  J.  C.  P.  91. 

191  Frazier  v.  Trow's  Printing  &  Bookbinding  Co.,  24  Hun,  2S1;  Gray  v. 
Wood,  2  Har.  &  J.  328;  McSbarran  v.  Neeley,  91  Pa.  St.  17. 


Ch.  2]  DATE.    .  75 

all  parties  are  deemed  to  consent  that  the  holder  may  fill  up  the 
blank  with  a  date.^^^  Legally  speaking,  the  chief  importance  of 
a  date  is  that  it  is  presumptive  evidence  of  the  time  of  its  actual 
execution,  a  presumption,  however,  which  may  be  contradicted  by 
parol  evidence.^ ^^  Likewise  the  place  of  date  is  supposed  to  be 
contemplated  by  the  parties  as  the  place  of  payment,^®*  because,  in 
the  absence  of  all  other  guides  to  any  information  on  this  point, 
the  courts  turn  to  the  instrument  itself,  and  say  the  place  of  date 
is  probably  the  place  of  residence  of  the  parties,  and  it  is  reason- 
able to  suppose  that  the  parties  contemplated  the  place  of  their  resi- 
dence as  the  place  where  the  instrument  was  to  be  paid.  It  becomes 
important  sometimes  in  determining  whether  the  instrument  is  a 
foreign  or  inland  bill  or  note,  and  where  presentment  and  demand 
are  to  be  made,  or  where  notices  of  dishonor  are  to  be  sent,  and 
questions  of  that  character.^  °°  These  remarks  are  to  be  understood 
with  some  limitations.  The  date  of  a  completed  instrument  can- 
not be  changed  unless  by  mutual  consent  without  avoiding  it.^®" 
Neither  must  it  be  understood  that  dating  a  note  at  a  particular 
place  makes  that  place  the  one  at  which  payment  should  be  de- 
manded. It  does  not."'^  It  merely  is  a  presumption  to  guide  the 
court.  And,  lastly,  in  practical  affairs  an  instrument  without  date 
will  not  circulate,  because  neither  banks  nor  merchants  will  dis- 

192  Knisely  v.  Sampson,  100  111.  574. 

i93Germania  Bauk  v.  Distler,  4  Hun,  G33,  affirmed  in  G4  N.  Y.  642: 
Drake  v.  Rogers,  32  Me.  524;  Brewster  v.  McCardell,  8  Wend.  479;  Mitchell 
V.  Culver,  7  Cow.  33G. 

194  The  dating  of  a  promissory  note  is  prima  facie  evidence  of  the  place 
of  payment,  as  it  is  presumptive  evidence  that  the  maker  resides  at  the 
place  of  date.  Where  the  maker  is  known  to  have  a  residence  which  is 
not  changed  when  the  note  is  payable,  a  regular  demand  must  be  made, 
regardless  of  the  place  of  date.  Taylor  v.  Snyder,  3  Denio,  145;  see,  also,  Bank 
of  Orleans  v.  Whittemore,  12  Gray,  469.  As  to  the  presumption  raised  by  the 
date  as  to  the  maker's  residence,  see  Smith  v.  Philbrick,  10  Gray,  252; 
Demond  v.  Burnham,  133  Mass.  330. 

195  Stewart  v.  Eden,  2  Caines,  121. 

196  See  §107,  post. 

197  Anderson  v.  Drake,  14  Johns.  114.  It  is  held  in  this  case  that  where 
a  note  is  not  made  payable  at  a  particular  place,  and  the  owner  has  a 
known  and  i)ermanent  residence  within  the  state,  the  holder  is  bound  to 
make  a  demand  at  such  residence  in  order  to  charge  the  iudorser.     Who- 


76  OP    NEGOTIABLE    BILLS    AND    NOTES.  [Gh.   2 

count  it.  The  date,  in  most  instances,  determines  when  the  instru- 
ment is  to  be  paid.  And  unless  it  has  a  date,  or  one  is  agreed 
upon  and  inserted,  it  is  impracticable  as  a  circulating  medium. 

VALUE  RECEIVED. 

39.  Value  received  is  not  necessary  to  be  expressed  in 
a  negotiable  instrument.     It  means: 

(a)  In   a  note,   value   received  by  the    maker  of  the 

payee. 

(b)  In    a    bill    before    acceptance,    value    received    by 

dra"wer  of  the  payee. 

(c)  In   a  bill  after  acceptance,  value  received  by  ac- 

ceptor of  the  dra\\rer. 

The  expression  "value  received"  is  an  acknowledgment  of  the 
receipt  of  a  consideration  sufficient  prima  facie  to  support  the  con- 
tract, and  make  it  a  binding  promise  for  the  payment  of  money- 
It  raises  the  various  questions  relating  to  consideration,  which,  so 
far  as  they  pertain  to  the  circulation  of  the  instrument,  are  com- 
mented upon  hereafter.^"^  In  itself,  as  appears  from  the  principal 
statement,  with  bills  it  means  that  a  consideration  has  been  re- 
ceived by  the  drawer  of  the  payee,  or  by  the  acceptor  of  the  drawer, 
according  as  the  bill  has  or  has  not  been  accepted.^®"  With  notes 
it  implies  a  consideration  received  by  the  maker.^°°  Indorsers,  from 
the  mere  fact  of  their  indorsement,  are  deemed  to  have  received 
a  consideration,  each  indorser  from  his  immediate  indorsee.-"^  And 
thus  the  instrument  in  its  circulation  bears  upon  itself  prima  facie 
proof  of  a  consideration  received  by  any  of  the  parties  against  whom 
it  is  sought  to  be  enforced.  The  student  must,  however,  note  that, 
although   these  words  are  well-nigh    universal   in  negotiable   bills 

ever  takes  such  note  is  presumed  to  have  made  inquiry  for  the  residence 
of  the  malser  in  order  to  know  where  to  demand  payment. 

188  See  post,  §  112  et  seq. 

198  Grant  v.  Da  Costa,  3  Maule  &  S.  ?,:>l;  Benjamin  v.  Tillman,  2  McLean, 
213,  Fetl  Cas.  No.  1,304;  Highmore  v.  Primrose,  5  Maule  &  S.  65;  Thurmao 
V.  Van  Brunt,  19  Barb.  409. 

200  Clayton  v.  Gosling,  5  Barn.  &  C.  301,  8  Dowl.  &  R.  110. 

201  Edw.  Neg.  Inst.  §  439;  Chit.  Bills,  G9;  Story,  Prom.  Notes,  7,  81. 


Ch.    2]  DAYS    OF    GRACE.  77 

and  notes,  they  are  in  no  wise  necessary  to  them.*"*  Their  omis- 
sion is  unimportant,  because  the  negotiable  instrument  itself  im- 
ports a  consideration.  A  mere  production  of  the  instrument  on 
a  trial  is  prima  facie  proof  of  the  fact  that  it  was  given  for  a  suffi- 
cient consideration.'^"'  The  courts  of  New  York  in  a  late  deci- 
sion ^"^  have  declared  that  this  rule  applies  to  certain  classes  of  non- 
negotiable  promissory  notes,  or  at  least  to  that  class  which  import 
an  absolute  promise  to  pay  money,  but  without  words  of  negotia- 
bility. It  is  hard  to  say  what  effect  this  decision  will  have  upon 
the  rule  that  in  case  of  a  non-negotiable  instrument,  unless  a  con- 
sideration appeared  upon  the  face  of  the  instrument,  and  prima 
facie  evidence  was  thus  created  by  an  admission  upon  the  instrument 
itself,  a  consideration  must  be  proved.^°°  But  it  will  perhaps  be 
the  case  that,  except  in  absolute  promises  for  the  payment  of  money, 
the  latter  rule  will  still  prevail. 

DAYS  OF  GRACE. 

40.  Days  of  grace  are  days  added  to  the  nominal  time 
of  payment  of  all  bills  or  notes  except  those  impliedly 
or  expressly  payable  on  demand,  and  are  computed  by  ex- 
cluding the  day  of  date  and  including  the  day  of  payment. 

202  Underbill  v.  Phillips,  10  Hun,  591;  Arnold  v.  Spragne,  34  Vt.  402; 
People  V.  McDermott,  8  Cal.  288;  Jennison  v.  Stafford,  1  Ciish.  168;  Dean 
V.  Carrutli,  108  Mass.  242.  This  case  holds  that  in  an  action  on  a  prom- 
issory note  the  plaintiff  sustains  the  burden  of  proof  by  producing  the  note 
and  proving  its  execution.  It  is  evidence  under  the  hand  of  the  promisor 
of  a  contract  made  upon  a  good  consideration,  even  if  the  words  "value  re- 
ceived" are  omitted.  Townsend  v.  Derby,  3  Mete.  (Mass.)  363;  Hatch  v. 
Trayes,  11  Adol.  &  E.  702. 

203  Uuderhill  v.  Phillips,  10  Hun,  591;  Kimball  v.  Huntingdon,  10  Wend. 
675;   Townsend  v.  Derby,  3  Mete.  (Mass.)  363. 

204  Camwright  v.  Gray,  27  N.  E.  835,  127  N.  Y.  92.  See,  also,  Car- 
ver V.  Hayes,  47  Me.  257;  Franklin  v.  March,  6  N.  H.  364.  Here  the  ac- 
tion was  upon  this  instrument:  "Good  to  R.  C.  or  order  for  ?30,  borrowed 
money."  And  it  was  held  that  in  this  case  the  note  "shows  that  it  is 
founded  upon  a  sufficient  consideration,  it  purporting  on  its  face  to  have 
been  given  for  money  borrowed;  and  'good  to  R.  C.  or  order'  is  equivalent 
to  a  promise  to  pay  R.  C.  or  order." 

205Averett  v.  Booker,  15  Grat.  169;  Atkinson  v.  Manks,  1  Cow.  691;  Bil- 
derback  v.   Burlingame,   27  111.  338;    Josselyn  v.   Lacier,  10  Mod.  294,  317. 


78  OK    NEGOTIABLE    BILLS    AND    NOTES.  [Ch.    2 

Originally,  days  of  grace  were  days  allowed  the  drawee  or  acceptor 
of  a  foreign  bill  by  the  holder  to  enable  him  to  provide  funds  to 
meet  the  bill.  They  were  days  obtained  by  the  drawee  or  acceptor 
through  the  grace  of  the  holder.  This  was  first  custom,  then  law. 
These  days  are  now  extended  to  cases  of  negotiable  inland  bills  and 
promissory  notes  as  well  as  the  foreign  bills  to  which  at  first  the 
custom  was  only  appended.  It  extends  under  the  common-law 
rules  to  all  negotiable  bills  of  exchange  or  notes,^°®  except  those 
wherein  the  instrument  is  made  payable  on  demand,  or  without 
specification  of  time,  in  which  case  on  demand  without  grace  is  un- 
derstood, or  wherein  grace  is  expressly  waived.  These  common- 
law  provisions  are  very  generally  modified  by  the  statutes  of  various 
states.  In  some  states,  too,  promissory  notes  are  not  entitled  to 
grace.  The  doctrine  is  that  they,  not  being  negotiable  in  them- 
selves, but  being  made  so  by  statute,  are  not  placed  upon  the  footing 
of  bills  of  exchange,  unless  the  statute  expressly  gives  them  all  the 
privileges  of  negotiability.  But  where  the  statute  does  place  notes 
on  the  footing  of  bills  of  exchange,  then  grace  follows  as  a  matter 
of  course.  For  the  same  reason  non-negotiable  instruments  are  not 
entitled  to  grace. 

The  number  of  days  allowed  as  grace  is  generally  three,^"^  and 
is  computed  by  adding  them  to  the  days,  or  months  reckoned  as  cal- 
endar months,  stipulated  in  the  instrument.-"^     The  day  of  date  is 

206  In  the  case  of  Oridge  v.  Sherborne,  which  was  an  action  on  a  promis- 
sory note  payable  in  installments,  it  was  held  that  the  maker  was  entitled 
to  the  usual  days  of  grace  as  each  installment  fell  due.  11  Mees.  &  W. 
374.  And  see  Perkins  v.  Franklin  Bank,  21  Pick.  (Mass.)  4S3;  Mechan- 
ics' Bank  v.  Merchants'  Bank,  6  Mete.  (Mass.)  13;  Wood  v.  Corl,  4  Mete. 
(Mass.)  203.  As  to  notes  payable  in  installments,  see  Coffin  v.  Loring,  5 
Allen  (Mass.)  153.  Checks  are  not  entitled  to  days  of  grace.  Andrew  v. 
Blachly,  11  Ohio  St.  89.  Johns.  Cas.  Bills  &  N.  50. 

207  Daniel  Neg.  Inst.  §  G22.  Demand  of  payment  on  negotialMe  bills  and 
notes  cannot  be  legally  made  until  the  third  day  of  grace.  Griffin  v.  CJoff,  12 
Johns.  (N.  Y.)  423,  Johns.  Cas.  Bills  &  N.  49.  In  the  case  of  Lenox  v.  Rob- 
erts it  was  held  that  demand  should  be  made  on  the  third  day,  and  notice 
of  the  maker's  default  be  posted  in  time  to  go  by  the  mail  of  the  day  after. 
Lenox  v.  Roberts,  2  Wheat.  373;  Bank  of  Alexandria  v.  Swann,  9  Pet.  33. 

208  Thomas  v.  Shoemaker,  6  Watts  &  S.  179;  McMurchy  v.  Robinson,  10 
Ohio,  49G. 


Ch.    2]  DAYS    OF    GRACE.  79 

excluded  from  the  calculation  and  the  day  of  payment  included.^"® 
This  computation  by  months  does  not  take  into  account  the  varying 
length  of  the  month.  The  time  reckoned  in  months  may  be  longer 
or  shorter,  according  as  there  are  more  or  less  days  in  the  month. 
It  also  does  not  take  into  account  the  fact  that  the  last  day  of 
grace  happens  upon  a  non-business  day.  In  this  last  event,  though 
in  case  of  all  non-commercial  instruments  the  time  which  must  ex- 
pire before  suit  can  be  brought  against  the  debtor  is  extended  to 
the  next  succeeding  business  day,^^°  yet  with  negotiable  instru- 
ments, under  the  common  law,  grace  is  not  extended  in  this  way. 
AVith  them  the  days  of  grace  end  on  the  next  preceding  business  day, 
because  the  debtor  cannot  compel  the  creditor  to  extend  the  indul- 
gence which  a  custom  of  doubtful  advantage  has  already  attached 
to  the  paper.^^^  This  rule  has  been  wisely  modified  by  the  statutes 
of  many  jurisdictions,  where  the  day  of  payment  has  been  declared 
to  be  the  next  succeeding  secular  or  business  day.''^'*  But,  in  the 
absence  of  any  express  statute,  it  is  generally  understood  that  the 
common-law  rule  would  prevail.  It  is  to  be  observed  that  in  New 
York  days  of  grace  have  been  abolished  by  statute.^^* 

209  Roehner  v.  Knickerbocker  Life  Ins.  Co.,  03  N,  Y.  160;  Bellasis  v.  Hes- 
ter, ILd.  Raym.  280;  Campbell  v.  French,  6  Term  R.  212;  Hartford  Bank  v. 
Barry,  17  Mass.  24;  Ripley  v.  Grefenleaf,  2  Vt.  129;  Avery  v.  Stewart,  2 
Conn.  69,  Johns.  Cas.  Bills  &  N.  57;  Heni-y  v.  Jones,  8  Mass.  453;  Pearson  v. 
Stoddard,  9  Gray  (Mass.)  199;   Wentworth  v.  Clap,  11  Mass.  87. 

210  Salter  v.  Burt,  20  "Wend.  205.  In  this  case  a  postdated  check  was  pay- 
able on  the  day  of  its  date,  without  daj's  of  grace.  As  it  fell  due  on  Sunday, 
the  question  arose  as  to  whether  payment  should  be  made  on  the  previous  Sat- 
urday or  the  Monday  following.  The  tollowing  is  a  portion  of  the  court's 
opinion:  "When  there  are  no  days  of  grace,  and  the  time  for  payment  or  per- 
formance specified  •  •  •  falls  on  Sunday,  the  debtor  may,  I  think,  dis- 
charge his  obligation  on  the  following  Monday."  A  bill  or  note  falling  due 
on  Sunday,  without  days  of  grace,  is  payable  on  the  following  day.  Hirsh- 
field  V.  Ft.  Worth  Nat.  Bank,  83  Tex.  452,  18  S.  W.  743;  Id.,  Johns.  Cas.  Bills 
&  N.  53;  Barrett  v.  Allen,  10  Ohio,  426;  Avery  v.  Stewart,  2  Conn.  69. 

211  Bussard  v.  Levering,  6  Wheat.  121;  Reed  v.  Wilson,  41  N.  J.  Law,  29; 
Kuntz  V.  Temple,  48  Mo.  78;  Farnum  v.  Fowle,  12  Mass.  89;  Barker  v.  Par- 
ker, 6  Pick.  (Mass.)  80;  City  Bank  v.  Cutter,  3  Pick.  (Mass.)  414. 

212  Rev.  St.  N.  Y.  pp.  2506,  2507. 

213  Sess.  Laws  1894,  c.  607. 


80  ACCEPTANCE    OF    BILLS   OF    EXCHANGE.  £Ch.   3 

CHAPTER  m. 

ACCEPTANCE  OF  BILLS  OF  EXCHANGE. 

41.  Definition. 

42-45.  Acceptance  According  to  Tenor. 

46.  Who  may  Accept 

47.  Delivery. 

48-49.  Forms  and  Varieties  of  Acceptance. 

50.  Implied  Acceptance. 

51-52.  Acceptance  on  Separate  Paper. 

53.  Parol  Acceptance  of  a  Bill. 

54-55.  Acceptance  for  Honor  or  Supra  Protest. 

DEFINITION. 

41.  An  acceptance  is  an  undertaking  by  the  drawee  to 
pay  the  bill  when  due. 

It  will  perhaps  help  the  student  to  understand  the  theory  of  ac- 
ceptance to  present  it  to  him  as  a  phase  of  the  elementary  theoret- 
ical notion  of  a  contract  as  constituted  by  an  offer  and  acceptance. 

The  acceptance  is  the  assent  to  the  proposition  contained  in  the 
draft,  which  on  its  part  is  an  offer,  and  which  offer  and  assent, 
taken  together,  constitute  a  contract  right  or  relation.  In  its  prac- 
tical aspect  as  a  contract,  it  obviates  the  transfer  of  cash  by  means 
of  credit  In  the  illustration  under  §  10,  0  owed  A.  A,  we 
may  assume,  says  to  B,  "Give  me  cash  for  my  debt,  and  treat  the 
debt  itself  as  cash."  B  agrees  to  this  proposition,  and  A  gives,  as 
an  evidence  of  the  transfer  of  the  debt  to  B,  the  ordinary  draft,  mak- 
ing him  the  payee.  B  then  turns  over  this  evidence  of  indebtedness, 
and  the  right  of  action  along  with  it,  to  D,  and  D,  on  his  part,  to  E. 
E  now  comes  with  the  paper  to  C.  At  this  point  the  relation  of 
the  parties  is  as  follows:  The  right  A  had  to  the  debt  of  C  is  now 
held  by  E  in  the  shape  of  a  piece  of  commercial  paper,  which  E  is 
about  to  present  to  C.  A  is  liable  to  B  for  the  £1,000  B  paid  A; 
B,  on  his  part,  is  liable  to  D  for  the  £1,000  paid  by  D  to  B;  and  D  to 
E.      As  yet  C  owes  nothing  to  B,  D,  or  E,  and  he  only  owes  A  for 


Ch.   3]  DEFINITION,  81 

the  debt  he  owed  him  in  the  first  place.  The  paper  in  E's  hands 
has  been  passing  from  hand  to  hand,  and  used  for  the  payment  of 
debts,  and  accepted  as  such  upon  the  supposed  solvency  of  each  per- 
son who  has  held  and  indorsed  it.  C  now  says,  "Yes,  I  will  pay  this 
£1,000";  and  evidences  his  assent  by  writing  on  the  bill  "Accepted" 
over  his  own  signature.  At  that  moment  he  enters  into  a  contract 
relation  with  the  holder  of  the  bill,  and  also  with  the  various  in- 
dorsers,  that  he  will  pay  the  bill.^  In  other  words,  C  promises  B, 
D,  and  E,  and  each  of  them  severally,  that  he  will  pay  £1,000  to  the 
holder.  Thus,  B,  D,  and  E  may  look  to  either  C  or  A  for  the  £1,000 
they  have  expended,  but  the  condition  implied  is  that  B,  D,  and  E, 
inasmuch  as  they  have  paid  A  for  C's  debt,  will  look  to  C  to  pay 
first,  and,  if  C  does  not  pay,  then  they  will  look  to  A.  This  is  the 
practical  aspect  of  the  theory  of  acceptance. 

It  follows  that  the  drawee,  until  acceptance,  is  a  stranger  to  the 
bill.2  In  Swope  v.  Ross  the  drawee,  who  had  not  accepted  a  bill, 
discounted  it  before  maturity,  and  the  argument  was  that,  in  thus 
cashing  it,  he  had  paid  it.  But  the  court  said  it  was  neither  ac- 
ceptance nor  was  it  payment,  unless  such  was  the  express  intention 
of  the  parties.  So  that  if  a  drawee  receives  and  discounts  a  bill  for 
the  drawer,  and  then  discounts  it  away,  the  drawer,  and  not  the 
acceptor,  is  the  person  who  must  ultimately  pay  the  bill.^  But  the 
drawee,  upon  acceptance,  in  the  order  of  liability,  becomes  the  prin- 
cipal debtor.  He  is  precisely  like  the  maker  of  a  promissory  note. 
This  means  that  all  parties  may  look  to  him  to  pay  the  instrument; 
that  no  demand  need  be  made  of  him;  and  that  notice  of  dishonor 
to  him  is  unnecessary, — all  matters  of  moment  in  business  affairs.* 

With  these  shifts  of  liability  on  the  part  of  the  drawee  before  and 

1  As  to  an  acceptance  being  irrevocabfe,  see  Trent  Tile  Co.  v.  Ft.  Dearborn 
Nat.  Bank  of  Chicago,  54  N.  J.  Law,  33,  23  Atl.  423,  Johns.  Cas.  Bills  &  N.  87. 

2  Swope  V.  Ross,  40  Pa.  St.  18G;  Chapman  v.  White.  6  N.  Y.  412;  Bellamy 
V.  ISIajoribanks.  8  Eng.  Law  &  Eq.  523;  Mandeville  v.  Welch,  5  Wheat.  277; 
Attenborough  v.  Mackenzie,  36  Eng.  Law  &  Eq.  562;  Desha  v.  Stewart,  6 
Ala.  8.52;  Tyler  v.  Gould,  48  N.  Y.  682;  Bullard  v.  Randall,  1  Gray  (Mass.) 
605;   Tieman  v.  Jackson,  5  Pet.  580. 

3  Chapman  v.  White,  6  N.  Y.  412;  Winter  v.  Drury,  5  N.  Y.  525;  Duncan 
V.  Berlin.  60  N.  Y.  151. 

*  Wallace  v.  McConnell,  13  Pet.  136,  which  contains  cases  on  this  point; 
Foden  v.  Sharp,  4  Johns.  183;  Wolcott  v.  Van  Santvoord,  17  Johns.  247;  Rus- 

NEG.  BILLS 6 


82  ACCEPTANCE    OF    BILLS    OF    EXCHANGE.  [Ch.   3 

after  acceptance,  there  is  a  corresponding  change  of  liability  on  the 
part  of  the  drawer.  If  the  drawee  refuses  to  accept,  after  having 
promised  so  to  do,  the  drawer  may  either  sue  him  directly  upon  the 
promise  for  all  loss  occasioned,^  or  he  may  fall  back  upon  their  origi- 
nal relation  for  his  remedy.  If  it  was  debt,  as  in  the  case  we  put,  he 
must  sue  on  the  indebtedness.  If  the  drawer  had  deposited  funds,  he 
must  demand  them,  and,  on  refusal,  sue  in  tort  or  for  conversion.  In 
such  a  case,  too,  as  we  have  already  shown,  all  prior  parties  must  look 
to  the  drawer  to  be  repaid  the  moneys  they  have  expended  on  taking 
the  bill.  The  drawer  remains,  at  all  times,  the  principal  debtor  on 
the  bill.  On  the  other  hand,  upon  acceptance  the  drawer  is  relieved 
from  primary  liability  upon  the  bill,  and  stands  as  to  the  other  par- 
ties to  the  instrument  in  a  relation  somewhat  akin  to  a  guarantor, 
or,  as  it  is  accurately  put,  in  the  position  of  first  indorser.  He  is 
liable  to  pay  the  bill  if  the  acceptor  does  not.  A  glance  at  the 
example  will  show  the  fairness  of  this.  A  received  from  B  cash  for 
a  debt  C  promised  to  pay;  B  received  cash  from  D;  and  D  from  E. 
If  C  fails  in  his  promise,  the  cash  received  should  be  refunded  in 
the  order  it  was  paid.  This  would  leave  the  controversy  as  it  ought 
to  be  between  C  and  A. 

So  far  as  classification  is  concerned,  acceptances  may  be  classified 
according  to  their  essential  elements,  and  according  to  their  tech- 
nical form.  In  their  essential  elments,  acceptances  are  analogous 
to  the  acceptances  of  propositions  in  ordinary  contract  law.  As 
with  the  acceptance  of  the  offer  in  the  ordinary  contract,*  the  ac- 
ceptance of  the  bill  of  exchange  must,  in  every  respect,  meet  and 
correspond  with  the  terms  contained  in  the  bill  itself.  It  must 
neither  fall  within  nor  go  beyond  these  terms,  but  must  exactly  meet 
them  at  all  points.'^     In  technical  phrase,  it  must  be  according  to 

sell  V.  Phillips,  14  Q.  B.  891;  Jarvis  v.  Wilson.  4G  Conn.  90;  Cox  v.  National 
Bank,  100  U.  S.  712. 

5  Ilsley  V.  Jones,  12  Gray  (Mass.)  260;  Riggs  v.  Lindsay,  7  Cranch,  500; 
Van  Wart  v.  Woolley,  5  Dow  &  R.  374;  Allen  v.  Suydam,  20  Wend.  321;  Bar- 
ney V.  Newcomb,  9  Cush.  (Mass.)  46. 

0  Potts  V.  Whitehead,  23  N.  J.  Eq.  512;  Eliason  v.  Henshaw,  4  Wheat.  225; 
Eads  V.  City  of  Carondelet.  42  Mo.  113;  Corcoran  v.  White,  117  111.  118.  7  N. 
E.  525:  Siebold  v.  Davis,  67  Iowa.  560,  25  N.  W.  778;  Northwestern  Iron  Co. 
V.  Meade,  21  Wis.  474;   Clark,  Cont  p.  36. 

7  See  post.  §  42. 


Ch.  3]  acceptancp:  according  to  tenor.  83 

the  tenor  of  the  bill.  Again,  as  with  the  ordinary  contract,®  an 
offer  made  to  one  person  cannot  be  accepted  by  another.  The 
drawee,  or  some  person  who,  in  view  of  law,  is  the  same  as  the 
drawee,  must  be  the  acceptor.®  And  like  the  ordinary  contract, 
also,  the  legal  obligation  is  not  created  until  the  delivery  of  the 
instrument.  In  their  technical  form,  acceptances  may  be  express 
or  constructive,  oral  or  written.^"  Express  acceptances  are  those 
expressed  in  the  words  of  the  drawee;  constructive,  those  implied 
from  his  acts.  Written  acceptances  are  assents  written  either  upon 
the  bill  itself,  or  upon  a  piece  of  paper  separate  from  the  bill.  The 
common,  general  principles  governing  the  detail  of  form  of  written 
acceptances  are  that  it  need  not  be  dated.  It  may  be  accepted  by 
the  drawee  in  any  name  he  chooses  to  adopt.^^  It  may  be  placed 
upon  a  bill  before  it  has  been  signed  by  the  drawer,  or  while  other- 
wise incomplete,^  2  or  after  it  is  overdue,  or  after  dishonor.  With 
these  general  observations  as  to  the  nature  and  form  of  acceptances, 
let  us  turn  and  examine  more  carefully  their  specific  details. 

ACCEPTANCE  ACCORDING  TO  TENOR. 

42.  The  acceptance  must  be  absolute  and  according  to 
the  tenor  of  the  bill  to  bind  all  the  parties  to  it. 

43.  THE  TENOR  OF  THE  BILL— Is  the  request  in  the 
bill  to  pay  the  money  at  the  time  and  place  and  in  the 
manner  mentioned  in  it.     A  change  in  the  acceptance  in 

•  Price  V.  Easton,  4  Barn.  &  Adol.  433;  Leake,  Cont.  481;  Tuttle  v.  Catlin, 
1  D.  Chip.  366;  Rossman  v.  Townsend,  17  "Wis.  95;  Ross  v.  Milne,  12  Leigh, 
204;  Ellison  v.  Jaclison  Water  Co.,  12  Cal.  542;  Seaman  v.  Whitney,  24  Wend. 
260;  Fugure  v.  Mutual  Soc.  of  St.  Joseph,  46  Vt  362;  Hasliett  v.  Flint,  5 
Blaclff.  69;   Clai-li,  Cont.  p.  508. 

9  See  post,  §  46. 

10  Sturges  V.  Fourth  Nat.  Bank,  75  III.  595,  Johns.  Cas.  Bills  &  N.  69;  Dull 
V.  Bricker,  76  Pa.  St.  255;  Averill  v.  Wood,  78  Mich.  342,  44  N.  W.  381;  Peter- 
son V.  Hubbard,  28  Mich.  197;  Grant  v,  Shaw,  16  Mass.  341;  Wells  v.  Brig- 
ham,  6  Cush.  (Mass.)  6. 

11  Lindus  v.  Bradwell,  5  C.  B.  591;  Alabama  Coal  Min.  Co.  v.  Brainard,  35 
Ala.  476;  NichoUs  v.  Diamond,  9  Exch.  154. 

12  London  &  Southwestern  Bank  v.  Wentworth,  5  Exch.  Div.  96;  Harvey 
V.  Cane,  34  Law  T.  (N.  S.)  64. 


84  ACCEPTANCE    OF    BILLS    OF   EXCHANGE.  [Ch.  3 

any  one  of  these  respects  renders  the  acceptance  "quali- 
fied." 

44.  The  payment  of  the  bill  by  the  acceptor  may  be 
made  dependent  on  a  condition.  It  is  then  called  "condi- 
tional" acceptance. 

45.  A  qualified  or  a  conditional  acceptance  is  only  valid — 

(a)  As  to  all  parties  subsequent  to  the  acceptance. 

(b)  As  to  all  prior  parties  "who,  upon  due  notice, 

assent. 

The  general  principle  is  that,  for  an  instrument  or  an  act  to  be 
an  acceptance,  it  must  be  according  to  the  tenor  of  the  bill.^^  The 
promise  must  be  to  pay  all  the  money  called  for  in  the  bill,  for, 
if  a  bill  be  accepted  for  only  part  of  that  sum,  it  would  result  in 
splitting  up  the  right  of  action  on  the  bill,  part  being  chargeable 
to  the  acceptor,  and  part  to  the  drawer;  it  would  necessitate  a  par- 
tial protest  for  non-acceptance  and  for  non-payment;  and  lastly, 
on  payment,  the  drawee  would  be  entitled  to  demand  the  possession 
of  the  bill,  and  his  possession  of  it  would  be  presumptive  evidence 
of  the  payment  of  the  whole  bill,  though  he  has  in  fact  paid  only 
part  of  it  These,  of  course,  are  grave  reasons  against  such  an  in- 
strument acting  as  a  circulating  medium.  So,  also,  equally  grave 
business  objections  exist  against  modifying  the  assent  to  the  bill, 

18  Wegersloffe  v.  Keene,  1  Strange,  214;  Boehm  v.  Garcias,  1  Camp.  425, 
note.  This  was  on  a  bill,  "payable  in  effective  and  not  in  vals  reals."  The 
drawee  offered  to  accept  payable  in  vals  denaros,  but  this  was  refused.  It 
was  held  that  the  plaintiff  had  a  right  to  so  refuse,  and  that  the  proposed 
acceptance  was  not  a  sufficient  acceptance  of  a  bill  drawn  as  was  this  one. 
The  acceptance  should  have  been  general.  Gibson  v.  Smith,  75  Ga.  34; 
Shackelford  v.  Hooker,  54  Miss.  716.  In  Petit  v.  Benson  it  was  held  that  a 
partial  acceptance  would  charge  acceptor  for  such  amount,  but  also  that  it 
might  be  refused  and  protested  by  the  one  to  whom  the  bill  is  due,  as  to 
the  whole  amount,  so  as  to  charge  the  first  drawer.  Comb.  452.  In  an  ac- 
tion upon  a  bill  of  exchange,  it  was  held  that,  where  the  day  of  payment 
was  past  at  the  time  of  acceptance,  an  agreement  to  pay  secundum  tenorem 
et  effect'um  billre  was  equivalent  to  a  general  acceptance,  for  the  reason  that 
it  was  then  impossible  to  pay  as  is  directed  in  the  bill.  Jackson  v.  Pigott, 
1  Ld.  Raym.  364;  Ford  v.  Angelrodt,  37  Mo.  50,  Johns.  Cas.  Bills  &  N.  76; 
Swope  V.  Ross,  40  Pa.  St.  186. 


Ch.   3]  ACCEPTANCE    ACCORDING    TO   TENOR.  85 

as  to  the  time,  place,  or  manner  of  its  payment,  or  making  its  pay- 
ment conditional.  For  if,  in  the  illustration  under  §  10,  the  bill 
was  a  6-months  bill,  and  B,  D,  and  E  were  indorsers  upon  it,  and  the 
bill  were  payable  in  Jamaica,  B,  D,  and  E,  as  indorsers,  might  make 
all  their  calculations  to  pay  the  money  at  that  time  and  place  if  C, 
the  acceptor,  did  not.  It  would  therefore  be  an  injustice  and  hard- 
ship to  B,  D,  and  E  if  C  were  to  accept  the  bill  in  three  months, 
payable  at  London,  England,  because,  if  C  did  not  pay  at  that  time 
and  place,  the  holder  might  sue  B,  D,  and  E,  who  had  every  right  to 
expect  that  they  would  not  be  called  upon  to  pay  until  after  the 
expiration  of  6  months,  and  then  at  Jamaica.  Thus  such  a  rule  is 
necessary  to  protect  the  other  parties  to  the  bill  who  act  as  sureties 
or  guarantors.  And,  taking  all  things  into  consideration,  it  is 
wiser  to  disallow  than  to  allow  them. 

But  the  student  must  not  understand  that  such  acceptances  in 
themselveig  are  bad.  They  promise  to  pay  the  bill.  They  create 
contract  rights  upon  the  consideration  which  would  have  rendered 
the  acceptance,  had  it  been  given  in  the  ordinary  form,  binding.  They 
are  contracts  valid,  but  so  inconsistent  with  the  contracts  of  the  in- 
dorsers acting  as  sureties  or  guarantors,  that  they  are  impracticable 
and  hence  not  allowed  to  be  enforced.  Where,  however,  they  do 
not  prejudice  the  rights  of  the  indorsers,  or  in  other  words,  where 
the  modification  of  the  tenor  of  the  bill  is  such  that  it  either  casts 
no  hardship  upon  the  indorser,  or  where  the  indorser  or  parties 
prior  to  the  acceptor  know  of  the  modification  and  assent  to  it,  there 
the  reason  for  rejecting  it  as  a  form  of  acceptance  ceases  to  exist, 
and  so  the  rule  is  that  a  modified  or  qualified  acceptance  if  imma- 
terial, or  if  known  and  assented  to,  is  a  valid  acceptance.^*  If  it 
is  a  material  alteration  of  the  terms  of  the  bill,  and  is  not  known 

1*  In  Smith  v.  Abbott  the  defendant  accepted  a  bill  to  pay  when,  the  goods 
for  wliich  it  was  drawn  were  sold.  As  the  plaintiff  submitted,  this  was  held 
good,  though  the  plaintiff  might  have  refused  such  acceptance,  and  have 
protested  the  bill.  2  Strange,  1152.  In  Walker  v.  Atwood  a  bill  without  a 
day  of  payment  was  accepted  by  the  drawee  to  be  paid  on  a  certain  date 
after  it  was  presented.  Although  bills  without  such  date  when  payable  are 
due  at  sight,  yet,  by  the  custom  of  merchants,  such  acceptance  was  held 
good.  11  Mod.  190.  Shackelford  v.  Hooker,  54  Miss.  71G,  Johns.  Cas.  Bills  & 
N.  78. 


86  ACCEPTANCE    OK    BILLS    OF    EXCHANGE.  fCll.   3 

and  assented  to,  then  it  is  invalid.  If  the  modification  is  known  and 
assented  to,  then  the  parties  enter  into  a  new  contract.  Parties 
subsequent  to  the  modified  acceptance  of  course  enter  into  the  con- 
tract on  the  basis  of  the  acceptance  as  modified  and  are  bound  by 
it.  Parties  prior  to  it  who  ass^t,  waive  their  right  to  object  and 
create  as  against  themselves  a  right  in  the  holder  akin  to  an  estop- 
pel. The  materiality  of  an  alteration  iu  the  tenor  of  the  bill  is  well 
brought  out  in  two  cases,  one  of  which  was  where  the  draft  was 
addressed  to  Cobourg,  and  accepted  payable  at  Port  Hope,  a  town 
some  miles  distant;  in  the  other,  where  the  bill  was  drawn  payable 
in  Xew  York  generally,  and  accepted  payable  "at  Continental  Bank, 
New  York."  ^^  In  this  last  case  the  fixing  or  designating  a  specific 
place  in  the  city  to  which  the  bill  was  addressed  was  no  hardship, — 
no  material  change;  while  compelling  an  indorser  to  be  ready  at 
some  distant  place  was  a  hardship  and  a  material  change. 

There  is  a  further  distinction  maintained  by  the  authorities,  which 
is  perhaps  rather  of  form  than  of  substance.  Where  the  accep- 
tance varies  the  offer  contained  in  the  bill  as  to  the  time,  place,  or 
mode  of  payment,  it  is  a  qualified  acceptance.^®  Where,  however, 
a  variation  is  introduced  into  the  acceptance  of  the  bill  in  the  na- 
ture of  a  condition,  tjie  acceptance  is  called  "conditional."  In  the 
last  class  of  cases  the  plaintiff  as  a  part  of  his  case  must  show  that 
the  condition  has  been  performed  before  the  liability  of  the  acceptor 
can  be  deemed  to  have  accrued.^^  A  common  example  of  this  is 
an  acceptance  to  pay  "when  in  funds,"  ^*  which  means  that  when 
the  acceptor  has  cash  which  the  drawer  has  a  right  to  demand  and 
receive  he  will  then  pay  the  bill.^®  This  manner  of  acceptance,  as 
well  as  the  qualified  one,  creates  a  new  contract,  and  is  governed 
by  the  rules  and  reasons  we  have  just  laid  down.      The  holder  may 

IB  Niagara  Dist.  Bank  v.  Faii-man  &  W.  Mach.  Tool  Manuf'g  Co.,  31  Barb. 
403;  Troy  City  Bank  v.  Lanman.  19  N.  Y.  477. 

16  Byles,  Bills,  31G;  Story,  Bills,  §  204;  Daniel,  Neg.  Inst.  §  515. 

17  Gammon  v.  Schmoll,  5  Taunt  344;  Nagle  v.  Homer,  8  Cal.  3.jS;  Read  T. 
Wilkinson,  2  Wash.  C.  C.  514,  Fed.  Cas.  No.  ll.Gll;  Gooding  v.  Underwood, 
89  Mich.  187.  50  N.  W.  818;  Ferguson  v.  Davis,  65  Mich.  677.  32  N.  W.  892; 
Storer  v.  Logan,  9  Mass.  55. 

18  Marshall  v.  Clary,  44  Ga.  513. 

19  Wintermute  v.  Post,  24  N.  J.  Law,  420;  Campbell  v.  Pettengill,  7  GreenL 
(Me.)  12G;  Owen  v.  Lavine,  14  Ark.  389. 


Ch.   3]  WHO    MAY    ACCEPT.  87 

elect  to  reject  it  altogether,  and  at  once  give  notice  either  of  non- 
acceptance  or  of  protest,  or  he  may,  if  willing  to  accept  the  offer, 
give  notice  to  prior  parties,  and  they  in  turn  may  assent  to  it,  and 
thus  become  bound.  This  is,  however,  not  always  the  rule  with  re- 
gard to  the  drawer  as  a  prior  party.  If,  as  is  sometimes  the  case, 
the  drawer  makes  a  draft  upon  a  drawee  without  having  a  right  to 
do  so,  there  is  no  more  reason  why  the  courts  should  release  him 
from  his  contract  than  that  they  should  seek  to  protect  him  by 
giving  him  notice  of  dishonor  in  case  of  a  refusal  to  accept  or  to 
pay.  In  both  cases  the  holder  is  injured  by  the  act  of  the  drawer, 
and  in  both  cases  the  drawer  is  held  bound.^° 

WHO  MAY  ACCEPT. 

46.  The  only  person  permitted  by  the  law  merchant  to 
be  an  acceptor  is  the  person  to  ■whom  the  bill  is  addressed. 
Another  person  is  liable  only  upon  a  collateral  undertak- 
ing. 

EXCEPTION— An  acceptor  for  honor. 

The  arbitrary  custom  of  merchants  is  said  by  the  courts  to  be  the 
reason  of  this  rule.  Though  it  is  not  the  language  of  the  courts, 
yet  it  so  coincides  with  the  fundamental  theory  of  contracts  that 
we  add  as  an  additional  reason  that  no  person  other  than  the  drawee 
can  be  acceptor,  because  such  a  person  would  be  in  a  measure  a 
stranger  to  the  contract.^^  He  is  not,  as  appears  from  the  face  of 
the  instrument,  indebted  to,  nor  has  he  funds  of,  the  drawer.  It 
is  true,  his  intention  may  have  been  to  signify  to  the  parties  to  the 
bill  that  he  was  willing  to  pay  and  would  pay  the  instrument.  But 
he  was  not  the  person  to  whom  the  proposition  or  on  whom  the 
order  was  made.  He  was  not  a  party  to  the  contract.  If  the  courts 
were  to  treat  him  as  an  acceptor,  they  would  make  a  contract  for 
the  drawer  with  a  party  with  whom,  as  far  as  it  can  be  gathered 
from  the  bill,  the  drawer  had  no  intention  of  contracting.  This, 
though  somewhat  vaguely  stated,  seems  to  be  the  underlying  prin- 

20  Daniel,  Neg.  Inst.  §  511. 

21  Heenan  v.  Nash,  8  Minn.  407  (Gil.  363),  Johns.  Gas.  Bills  &  N.  65;  Raborg 
V.  Peyton,  2  Wheat.  385. 


8S  ACCKPTANCE    OF    BILLS    OF    EXCHANGE,  [Ch.   3 

dple  in  Walker  v.  Bank  of  State  of  New  York."  In  that  case  the 
bill  was  addressed  to  Mr.  E.  C.  Hamilton,  of  New  York,  and  was 
"accepted  payable  at  American  Ex.  Bank.  [Signed]  Empire  Mills. 
By  E.  C.  Hamilton,  Treas."  The  question  was  whether  this  was  an 
acceptance,  and  the  court  said  this  was  an  acceptance  of  the  Empire 
Mills,  not  a  party  to  the  contract.  This  point  is  brought  out  more 
clearly  in  some  of  the  English  cases.  In  Jackson  v.  Hudson  ^^  a 
bill  was  addressed  to  Mr.  I.  Irving,  and  accepted,  "I.  Irving.  Jo- 
seph Hudson."  Tliis  was  a  case  for  sale  of  goods  to  Irving.  Hud- 
son accepted,  by  way  of  making  the  acceptance  doubly  sure.  But 
Lord  Ellenborough  said  Hudson's  undertaking  was  a  collateral  one. 
It  was  meant  to  be  a  guaranty,  and  not  an  acceptance.^*  This  rule  is 
subject  to  exceptions,  to  some  of  which  we  have  before  called  atten- 
tion. We  have  seen  that  if  it  were  clear  to  whom  the  bill  is  meant  to 
be  addressed,  and  the  acceptance  is  made  by  such  a  person,  then  the 
acceptance  is  sufficient.  This  is  based  upon  the  case  of  Gray  v. 
Milner,^®  where  an  instrument  was  addressed  "Pa^'able  at  No.  1 
Wilmot  St.,"  and  the  words  "Accepted,  Charles  Milner,"  were  treat- 
ed as  a  proper  acceptance,  because  such  an  address  could  only  mean 
the  person  residing  there.  This  rule  has  been  followed  in  this 
country,  and  it  is  now  probably  the  law.  In  addition  to  this  ex- 
ception, there  are  others.  A  draft  may  be  accepted  by  some  drawee 
other  than  the  one  named,  provided  in  the  draft  there  was  a  mis- 
nomer as  to  the  drawee  and  it  was  accepted  by  the  person  to  whom 
it  was  intended  to  be  addressed.^^  The  acceptor  for  honor — a 
branch  of  this  subject  to  be  discussed  later  on — is  also  a  modifica- 
tion of  this  rule.     Besides  these  instances,  an  agent  may  accept  for 

S2  Walker  v.  Bank  of  State  of  New  York,  9  N.  Y.  (5  Seld.)  582. 

28  Jackson  v.  Hudson,  2  Camp.  447. 

«*  Davis  V.  Clarke.  6  Q.  B.  16.  In  this  case  the  maker  drew  a  bill  of  ex- 
change payable  to  himself  or  order,  and  addressed  also  to  himself,  and  a 
third  party  signed  his  initials  to  the  word  "Accepted."  It  was  held  that 
such  third  party  could  not  be  sued  as  an  acceptor,  on  the  ground  that  he  was 
not  the  acceptor  of  a  bill  of  exchange  directed  to  him.  See.  also.  May  v. 
Kelly,  27  Ala.  497;  Steele  v.  McKinlay,  43  Law  T.  (N.  S.)  35a 

2«  Gray  v.  Milner,  8  Taunt.  739. 

2T  Hascall  v.  Life  Ass'n,  5  Hun,  15L 


Ch.    3]  DELIVERY.  89 

and  in  the  name  of  the  principal,^®  but  not  in  his  own  name,  because 
that  is  his  individual  acceptance,  and  not  the  acceptance  of  the 
drawee.** 

DELIVERY. 

47.  An  acceptance  is  probably  complete  only  upon  de- 
livery. 

It  is  maintained  by  Professor  Ames  that  an  acceptance  is  com- 
plete without  delivery  because,  as  he  says,  the  delivery  of  a  bill  or 
note  is  necessary  only  for  the  purpose  of  creating  or  transferring 
title.*"  The  reasons  for  the  rule  adopted  by  this  great  theorist  are 
undoubtedly  those  advanced  by  Lord  Coleridge  in  a  case  where  the 
question  was  whether  the  judge  of  the  Norfolk  county  court,  whose 
jurisdiction  was  apparently  local  and  dependent  upon  the  locus 
curiae,  would  have  jurisdiction  over  a  case  where  the  defendant 
signed  an  acceptance  in  London,  England,  and  sent  it  to  Norwich, 
Norfolk  county.  The  court  held  such  an  action  was  properly  brought 
in  London,  and  not  in  Norwich,  and  his  lordship,  referring  to  the 
argument  that  an  acceptance  was  like  an  indorsement,  distinguished 
the  acceptance  from  an  indorsement,  and  said:  "One  purpose  of  an 
indorsement  is  to  pass  the  property  in  the  bill,  and  that  purpose  is 
not  effected  until  actual  or  constructive  delivery.  But  the  acceptor 
has  no  property  in  the  bill  before  or  after  acceptance.  He  must 
be  supposed  to  receive  the  drawer's  paper  and  on  it  write  his  prom- 
ise without  in  any  way  altering  the  property  in  the  bill.  He  may, 
indeed,  before  any  communication  to  the  drawer  of  the  act  done, 
revoke  it,  but  his  promise,  unless  so  revoked,  is  complete,  and  takes 

2  8  Thorn.  Bills,  211. 

2  0  Daniel,  Neg.  lust.  §  487.  A  bill  was  directed  to  a  company,  and  was 
accepted  for  the  company  by  one  of  its  members,  who  signed  as  manager. 
In  an  action  on  this  it  was  claimed  that  such  acceptance  did  not  bind  the 
party  accepting,  because  he  had  no  authority.  This,  however,  was  held  not 
to  affect  his  personal  liability,  as  it  was  shown  that  he  was  one  of  those  as- 
sociated under  the  name  of  the  company  to  whom  the  bill  was  directed. 
The  bill  was  held  not  vitiated  by  the  misrepresentation  of  the  defendant. 
Owen  V.  Van  Uster,  20  Law  J.  C.  P.  61.  To  the  same  purpose,  see  Nicholls 
V.  Diamond,  9  Exch.  154. 

80  2  Ames.  Bills  &  N.  p.  791. 


90  ACCEPTANCE    OF    BILLS    OF    EXCHANGE.  [Ch.    5 

effect  from  the  time  when  it  is  made."  "^  Though  this  opinion  thus 
laid  down  is  sustained  by  great  and  venerable  authority,  yet  it  is 
submitted  that  delivery  of  a  written  contract  is  at  all  events  a  most 
conspicuous  evidence  on  the  part  of  the  person  delivering  it  of  in- 
tention to  be  bound.  And  it  should  be  an  important  factor  with 
the  acceptance,  as  with  every  other  species  of  contract  right,  to  de- 
termine, not  whether  the  acceptor  has  in  fact  signed  the  bill,  but 
whether  he  actually  intended  to  be  bound  by  it.  With  the  maker's 
contract,  for  instance,  so  long  as  the  maker  of  a  note  retains  it  in 
his  own  hands,  it  is  a  nullity.  It  does  not  become  operative  until 
it  is  transferred  to  some  other  person;  '^  and  even  when  once  signed, 
and  the  signature  is  then  erased,  the  holder  of  a  bill  or  any  ante- 
cedent party  cannot  be  prejudiced  by  it.  It  must  be  the  same  thing 
to  them  whether  the  drawee  gives  it  back  or  delivers  it  to  him  un- 
accepted, or  whether  he  finds  that  the  drawee  has  withdrawn  his 
acceptance,  having  at  one  time  intended  to  accept  it,  but  having 
subsequently  changed  his  mind.  And  it  seems  perfectly  competent 
in  cases  where  the  fact  of  acceptance  is  uncommunicated  for  the 
drawee  to  erase  or  cancel  his  acceptance  before  he  deliver  the  bill.'^ 
Where  the  acceptance  has  been  communicated  a  different  element 
is  introduced,  depending  upon  the  question  of  substantial  loss.  The 
reason  why  an  uncommunicated  acceptance  can  be  canceled  before 
delivery  is  that  neither  the  holder  nor  prior  parties  are  worse  off 
than  if  the  holder  was  just  about  making  presentment.  And  even 
if  the  acceptance  be  communicated,  yet  if  the  note  be  undelivered, 
and  the  holder  be  still  in  a  position  to  make  re-presentment,  and  to 
protest  and  to  hold  prior  parties,  the  same  reasons  to  allow  cancella- 
tion prevail.^*  He  has  lost  no  right  by  reason  of  the  communication  of 
the  fact  of  acceptance  that  he  would  have  had,  had  his  acceptance 

81  Wilde  V.  Sheridan,  21  Law  J.  Q.  B.  2G0.  See,  also,  Bentinck  v.  Dorrien. 
6  East,  199.  In  this  case  a  bill  on  the  defendants  was  left  by  the  plaintiff, 
who  was  indorsee.  The  defendants  accepted,  but  on  the  next  day  canceled 
their  acceptance,  whereupon  plaintiff  protested  for  nonacceptauce.  It  was 
held  that,  while  such  acceptance  might  be  valid  as  to  a  third  party,  the 
plaintiff  had,  by  protesting,  precluded  himself  from  claiming  an  acceptance. 
Thornton  v.  Dick,  4  Esp.  270. 

82  Gale  V.  Miller,  54  N.  Y.  536;   Dunavan  v.  Flynn,  118  Mass.  537. 
3  3  Cox  V.  Troy,  5  Barn.  &  Aid.  474. 

8  4  Irving  Bank  v.  Wetherald.  36  N.  Y.  335. 


Ch.   3]  FORMS    AND    VARIETIES    OF    ACCEPTANCE.  91 

been  refused.  But  if,  on  the  other  hand,  the  drawee  retain  the  bill  aft- 
er communicating  his  acceptance,  and  for  this  reason  loss  is  caused 
to  the  holder  or  other  parties  to  the  bill,  the  principles  of  estoppel 
would  apply,  and  it  is  probable  that  the  right  of  revocation  would 
be  denied.  In  this  view  of  the  case  the  reason  is  that  the  equitable 
rule  that  he  who  occasions  loss  must  suffer  for  it  should  prevail 
over  the  rule  of  evidence  that  unconditional  delivery  of  a  written 
contract  is  the  best  evidence  of  an  intention  to  be  bound  by  it. 
And  it  is  submitted  that  the  reason  cannot  be  that  an  acceptance 
once  signed  is  binding  whether  such  was  the  intention  of  the  party 
or  not.^"* 

FORMS  AND  VARIETIES  OF  ACCEPTANCE. 

48.  An  acceptance,  if  in  -writing,  is  constituted  by  •words 
not  putting  a  direct  negative  upon  the  order  contained  in 
the  bill.  The  question  is  -whether  an  intention  to  accept 
can  be  construed  from  the  -words. 

49.  An  acceptance,  if  verbal,  is  constituted  by  any  ^vords 
-which  evidence  such  intention  clearly  and  unequivocally, 
if  they  be  addressed  to  the  dra-wer  or  holder,  and  he 
-waive  his  right  to  a  -written  acceptance.  An  acceptance 
may  also  be  implied  from  conduct  evidencing  such  inten- 
tion. 

The  foregoing  principal  text  shows  the  form  and  varieties  of  ac- 
ceptances. They  are  acceptances  expressed  in  written  or  spoken 
words,  as  contrasted  with  each  other  and  also  with  acceptances 
implied  from  merely  the  conduct  of  the  drawee.  Another  variety 
of  the  general  class  is  caused  by  its  being  written  on  a  separate 
piece  of  paper;  and  a  third,  by  its  being  issued  as  a  written,  spoken, 
and  implied  acceptance  before  or  after  the  issuing  of  the  bill.  It 
is  our  purpose  to  first  show  the  underlying  theory  of  an  acceptance, 
and  then  to  show  the  forms  and  general  principles  required  for  an 
acceptance  by  the  law  merchant. 

As  has  been  said,  the  acceptance  is  the  assent  of  the  drawee  to 

«B  Smith  T.  McClure,  5  East,  47Q;    Dun.ivan  v.  Flj-nn,  118  Mass.  537. 


92  ACCEPTANCE    OF    BILLS    OF    EXCHANGE.  [Ch.   3 

the  proposition  of  tlie  drawer.  The  question,  then,  is,  what,  under 
the  law  merchant,  will  be  deemed  an  evidence  of  such  assent^' 
There  are  three  general  classes  based  upon  the  divisions  we  have 
given  above:  Acceptances  in  writing,  acceptances  by  parol,  and 
acceptances  implied  from  conduct. 

If  in  writing,  the  courts,  according  to  Judge  Cowen,'^  go  to  the 
length  of  saying  that  any  form  of  words  which  do  not  in  themselves 
negative  the  request  of  the  bill  shall  be  treated  as  a  valid  acceptance 
of  it.*'  Under  the  common  law,  neither  the  word  "Accepted"  nor 
the  signature  of  the  acceptor  is  necessary.  The  unsigned  words 
"Seen,"  *"  "Presented,"  *°  "Honored,"  *^  or  merely  the  name  of  the 
draW'Ce,*'^  or  "I  will  pay  this  bill,"  **  are  sufficient  acceptances,  and 
evidence  the  fact  merely  that  the  drawee  has  seen  the  bill,  and  does 
not  dissent  from  it.  In  many  jurisdictions  written  and  signed  ac- 
ceptances are  required,  meaning,  according  to  the  interpretation 
of  numerous  cases,  that  an  acceptance  is  sufficient  if  it  be  the  name 
of  the  acceptor  alone,  which  complies  with  the  regulation  that  the 

88  In  re  Armstrong,  41  Fed.  381;  Van  Staphorst  v.  Pearce,  4  Mass.  258; 
Peck  V.  Cochran,  7  Pick.  (Mass.)  34. 

3  7  Spear  v.  Pratt,  2  Hill.  582. 

8  8  Where  a  bill  was  drawn  on  the  defendant,  and  he  wrote  across  it:  "Ac- 
cepted. Payable  at  Messrs.  Stevens  &  Co.,"— but  failed  to  sign,  it  was  held 
to  amount  to  an  acceptance.  The  court,  in  summing  up,  said  that  it  was  of 
opinion  that  the  writing  might  be  valid  in  law,  though  unsigned,  but  that 
whether  it  was  intended  so  to  operate  in  its  unfinished  condition  was  a  ques- 
tion for  the  juiy.  Dufaur  v.  Oxenden,  1  Moody  &  R.  90.  In  an  action  of 
assumpsit  by  the  indorsee  against  the  acceptor,  it  was  proved  that  the  de- 
fendant had  given  a  stamp,  with  his  acceptance  in  blank  to  the  drawer,  and 
authorized  him  to  draw  at  a  certain  date  for  a  specific  amount.  It  was  held 
that  there  was  an  actual  acceptance  in  writing,  with  express  authority  to 
fill  in  the  bill  in  a  particular  manner.     Leslie  v.  Hastings,  1  Moody  &  R.  119. 

88  Bamet  v.  Smith,  10  Fost.  (N.  H.)  256. 

4  0  Pars.  Bills  &  N.  282. 
*i  Anson,  Cont.  401. 

*2  The  drawee  of  a  bill  of  exchange  wrote  his  name  across  the  face  of  the 
bill,  without  words  of  accentance.  This  was  held  to  be  such  an  acceptance 
as  to  bind  him,  even  though  the  statutory  reauiroments  were  tliat  the  ac- 
ceptance should  be  in  writing,  and  signed.     Spear  v.  Pratt,  2  Hill  (N.  Y.)  582. 

*8  Ward  V.  Allen.  2  Mete.  (Mass.)  53. 


Ch.    3]  FORMS    AND    VARIETIES    OF    ACCEPTANCE.  93 

acceptance  shall  be  in  writing  and  be  signed.**  And  every  holder 
of  a  bill,  presenting  the  same  for  acceptance,  may  require  the  ac- 
ceptance to  be  written  on  the  bill.  A  refusal  to  comply  shall  be 
deemed  a  refusal  to  accept,  and  the  bill  may  be  protested. 

In  jurisdictions  where  acceptances  are  not  required  to  be  in  writ- 
ing, or  the  statutes  do  not  otherwise  modify  the  common  law,  parol 
acceptances,  if  assented  to  by  the  holder,  are  permitted.* "^  A  parol 
acceptance  is  any  form  of  words  used  by  the  drawee  which  by  rea- 
sonable intendment  can  be  made  to  signify  that  he  honors  the  bill. 
There  are  some  limitations  to  this  rule.  These  words  are  to  be  ad- 
dressed to  the  drawer  or  holder.  They  must  be  assented  to  by  the 
holder.**  They  must  relate  to  an  existing  bill,  for,  if  they  pertain 
to  a  future  bill,  they  will  not  be  deemed  an  acceptance.  They  must 
be  unequivocal,  for,  if  they  are  equivocal,  they  will  not  be  deemed 
an  acceptance.  In  such  expressions  as  "Your  bill  shall  have  atten- 
tion," "I  will  pay  the  bill,  but  I  cannot  now,"  "I  will  give  you  a  bill  at 
three  months,"  *^  there  is  no  distinct,  definite  promise  or  agreement 

44  Alabama,  Code,  §  2101;  Arizona,  Comp.  Laws.  §§  3409-3471 ;  California, 
1  Hitt.  Code,  §  8193;  Connecticut.  Laws  1893,  c.  95;  Idaho,  Rev.  Laws,  p. 
653;  Kansas,  Comp.  Laws,  c.  14,  §  8;  Maine,  Rev.  St.  c.  32,  §  10;  Michigan, 
1  Comp.  Laws,  p.  516,  §  7;  Minnesota,  Gen.  St.  p.  316,  §  13;  Mississippi,  Code, 
§  1133;  Nevada,  1  Comp.  Laws,  c.  5,  §  6;  New  York,  Rev.  St.  p.  249!i.  §  6; 
Oregon,  Gen.  Laws,  p.  718,  §  7;  Pennsylvania,  Pub.  Laws  1881,  p.  17;  Wis- 
consin, Rev.    St.  1G81. 

*5  Scudder  v.  Union  Nat.  Bank,  91  U.  S.  406;  Stockwell  v.  Bramble,  3  Ind. 
428;  Mason  v.  Dousay,  35  111.  424;  Sturges  v.  Fourth  Nat.  Bank,  75  111.  595; 
St  Louis  Nat.  Stockyai-ds  v.  O'Reilly,  85  111.  546;  Exchange  Bank  v.  Rice,  98 
Mass.  288.  In  this  case,  J.  P.  Hill  drew  a  bill  to  order  of  J.  Pitman  &  Co. 
"against  12  bales  of  cotton."  This,  being  indorsed  to  plaintiffs,  they  presented 
for  acceptance,  which  was  refused.  In  a  letter  to  Hill,  defendants  explained 
that  this  was  because  no  bill  of  lading  had  been  received,  but  on  receipt  of 
it  the  bill  would  be  accepted.  Having  procured  this  letter  and  duplicate  bill 
of  lading,  plaintiffs  again  presented,  and  then  protested  for  non-acceptance, 
and  finaUy  for  non-payment.  It  was  held  that  the  letter  to  Hill,  having  been 
viTitten  after  plaintiffs  took  the  bill  of  exchange,  which  was  not  addressed  to 
them,  did  not  make  defendants  liable  as  acceptors.  Sproat  v.  Matthews,  1 
Term  R.  182;  Arnold  v.  Sprague,  34  Vt  402;  Miller  v.  Neihaus,  51  Ind.  401; 
Pierce  v.  Kittredge,  115  Mass.  374. 

4  6  Story.  Bills,  §§  242-247;  Edw.  Bills  &  N.  §§  410.  417;  Bay  ley.  Bills  & 
N.  c.  6,  §  109;   Johnson  v.  Collings,  1  East.  98. 

47  Reynolds  v.  Peto.   11  Exch.  418. 


94  ACCEPTANCE    OF    BILLS    OF    EXCHANGE.  [Ch.   3 

to  pay  the  bill.  They  were  consequently  deemed  by  the  court  too 
uncertain  to  be  treated  as  acceptances.  The  point  to  be  determined 
is  whether,  by  a  reasonable  construction,  the  words  used  will  show 
that  the  acceptor  recognized  an  immediate  obligation  on  his  part 
to  the  drawer  upon  him,  assented  to  it,  and  declared  himself  bound 
to  the  payment  of  it  as  evidenced  by  the  bill.**  Keeping  in  mind 
the  expressions  we  have  quoted,  contrast  them  with  such  ex- 
pressions as  those  used  by  the  drawee  in  a  case  where  a  foreign 
bill  had  been  protested  for  nonacceptance,  and  the  drawee  said, 
"If  the  bill  comes  back,  I  will  pay  it,"  *®  or,  in  another  case,  where 
the  drawee  said,  "Leave  your  bill  with  me,  and  I  will  accept,"  °°  both 
of  which  expressions  were  held  to  be  sufficient  acceptances.  In 
these  last  expressions  there  was  a  distinct  promise  to  honor  the  bill. 
It  is  probably  the  case  that,  when  verbal  acceptances  are  permitted, 
they  will  at  the  present  day  be  construed  with  extreme  strictness. 
It  is  undoubtedly  the  common  law  that  they  are  allowable.^^  But 
it  is  also  equally  true  that  they  are  not  in  accord  with  the  true 
theory  of  negotiability.     A  bill  of  exchange  should  have  all  its  in- 

*8  In  Powell  V.  Jones,  the  bill  was  given  to  the  defendant  for  acceptance 
by  the  clerk  of  the  plaintiff.  On  calling  for  it  afterwards  the  defendant 
said:  "There  is  your  bill.  It  is  all  right."  It  was  held  that  these  words 
did  not  amount  to  an  acceptance,  as  they  did  not  evidence  the  defendant's 
intention  to  bind  himself  to  pay  at  all  events.  1  Esp.  17.  The  words:  "If 
you  will  send  it  to  the  counting-house  again,  I  will  give  directions  for  its 
being  accepted,"  were  held  to  constitute  only  a  conditional  promise,  and  not 
to  operate  as  an  acceptance  until  the  bill  was  actually  sent  back.  Anderson 
V.  Hick,  3  Camp.  179.  Where  the  defendants  agreed  to  accept  upon  the 
happening  of  some  contingency,  it  was  held  that  such  conditional  acceptance 
could  not  be  declared  on  as  an  absolute  acceptance,  wlieu  such  contingency 
had  actually  happened.     Langston  v.  Corney,  4  Camp.  176. 

*eCox  V.  Coleman,  Chit.  Bills,  274. 

Bol  Chit.  Bills,  p.  12. 

61  In  Spaulding  v.  Andrews,  it  was  shown  that  shortly  after  a  bill  was 
drawn,  the  payee,  who  was  the  holder,  presented  it  to  the  drawee,  and  re- 
ceived verbal  assurance  that  it  would  be  paid  on  maturity.  It  was  held  there 
was  an  acceptance  good  as  to  a  third  party  who  obtained  the  bill  after  such 
parol  acceptance,  though  he  did  not  know  of  the  acceptance,  and  that  it 
made  no  difference  as  to  when  a  parol  acceptance  was  made,  if  after  the  bill 
was  drawn.  48  Pa.  411.  As  to  the  sufticiency  of  a  parol  acceptance  as  af- 
fected by  the  statute  3  &  4  Anne,  c.  9,  see  Lumley  v.  Palmer,  2  Strange,  1000. 


Ch.    3]  FORMS    AND    VARIETIES    OF    ACCEPTANCE.  95 

dicia  upon  its  face.  And  this  rule,  with  every  other  that  contra- 
venes it,  complicates  business  operations,  and  clogs  the  circulation 
of  an  instrument  as  a  medium  of  payment."** 

SAME— IMPLIED  ACCEPTANCE. 

50.  AN  IMPLIED  ACCEPTANCE— Is  any  act  which 
clearly  indicates  an  intention  to  comply  with  the  request 
of  the  draw^er,  or  any  conduct  of  the  draw^ee  from  w^hich 
the  holder  is  justified  in  draw^ing  the  conclusion  that  the 
drawee  intended  to  accept  the  bill,  and  intended  to  be  so 
understood.^ 

An  implied  acceptance  is  equally  open  to  the  objections  we  have 
made  to  the  verbal  acceptance,  though  the  doctrine  of  constructive 
or  implied  acceptance  is  in  itself  consistent  with  justice.  Its  limits 
are  not  exactly  defined.  It  arises  where  the  bill  is  detained  for  a 
long  time,  contrary  to  the  usage  of  the  parties,  or  withheld  upon  the 
understanding  that  the  drawee  is  to  accept"**  Where,  however,  the 
detention  is  not  contrary  to  the  usual  dealings  betweea  the  parties, 
or  is  due  to  the  fact  that  the  holder  failed  to  call  for  it,  the  docti'ine 
does  not  apply.^®  Destruction  of  the  bill,  when  the  act  is  tortious 
because  it  amounts  to  an  appropriation  or  conversion  of  the  bill, 
is  also  an  implied  acceptance.^'     The  reason  of  this  theory  is  that 

6  2  In  the  case  of  Johnson  v.  Collings,  the  bill  on  which  the  action  was 
brought  was  drawn  by  R  on  defendant,  the  latter  saying  that  if  R  would 
draw  such  bill  he  would  pay  it  on  maturity.  This  bill  was  subsequently 
indorsed  to  plaintiffs,  without  communication  with  defendant.  It  was  held 
that  such  mere  promise,  which  did  not  induce  a  third  person  to  take  the  bill, 
did  not  operate  as  an  acceptance.     1  East,  98. 

68  Daniel,  Neg.  Inst.  §  499;    1  Pars.  Notes  &  B.  287. 

o*Hall  V.  Steel,  68  111.  231;  Hough  v.  Loring,  24  Pick.  (Mass.)  254;  Nason 
V.  Barff,  2  Barn.  &  Aid.  26;   Koch  v.  Howell,  6  Watts  &  S.  350. 

0  5  Overman  v.  Hoboken  City  Bank,  30  N.  J.  Law,  61;  Cox  v.  Troy,  5  Bam. 
&  Aid.  474. 

6  6  Dunavan  v.  Flynn,  118  Mass.  537;  Johns.  Cas.  Notes  &  B.  72.  This  is 
not  always  so  held  by  all  courts.  In  the  case  of  Jeune  v.  Ward,  the  follow- 
ing formed  a  portion  of  the  opinion  of  the  court:  "If  a  party  says  he  has  de- 
stroyed the  bill  and  that  he  will  not  accept  it,  such  destruction  might  prob- 
ably subject  him  to  an  action  for  trover  for  the  bill,  but  I  cannot  think  that 


96  ACCEPTANCE    OF    BILLS    OF    EXCHANGE.  [Ch.  3 

when  a  bill,  in  the  ordinary  course  of  business,  is  left  with  the  ac- 
ceptor, he  is  to  consider  whether  he  will  accept  or  return  it  K  he, 
without  saying,  retains  it  in  his  liauds,  the  law  then  presumes  that 
he  has  done  that  for  which  the  bill  was  left,  and  which  is  for  the 
benefit  of  the  party  leaving  the  bill;  that  is,  that  he  has  accepted 
if^  Probably,  however,  the  rule  at  present  would  be,  that  when  a 
bill  is  so  left,  it  would  be  deemed  the  duty  of  the  party  who  left  it 
to  call  for  it  again,  and  to  inquire  whether  it  had  been  accepted  or 
not,  unless  this  was  contrary  to  the  usual  dealings  between  the 
parties."*  However  that  may  be,  the  reason  of  the  rule  is  plain. 
It  is  that  the  holder  shall  not  be  deprived  of  his  right  to  hold  the 
drawee  as  an  acceptor  where  the  drawee  by  his  delay  or  wrongful 
act  might  injure  the  holder,  and  perhaps  put  him  in  a  worse  position 
so  far  as  his  rights  against  prior  parties  are  concerned.^" 

SAME— ACCEPTANCE  ON  SEPARATE  PAPER. 

51.  If  the  bill  is  in  existence,  for  the  convenience  of 
business  the  acceptance  may  be  on  a  separate  paper,  but 
the  promise  must  be  clear  and  unequivocal. 

52.  If  the  bill  is  not  in  existence,  for  the  convenience 
of  business  the  acceptance  may  be  on  a  separate  paper. 
Its  elements  are: 

(a)  That  the  contemplated  drawee  shall  describe  the 
bill  to  be  drawn,  and  promise  to  accept  it. 

(b^  That  the  bill  shall  be  draw^n  in  a  reasonable  time 
after  such  promise  is  w^ritten. 

(c)  That  the  holder  shall  take  the  bill  upon  the  credit 
of  the  promise. 

it  would  amount  to  an  acceptance.  •  •  •  It  would  be  strange  indeed  If  a 
refusal  *  •  •  could  be  deemed  an  acceding  to  the  proposition."  1  Barn. 
&  Aid.  653. 

6T  Jeune  v.  Ward,  1  Barn.  &  Aid.  653;   Harvey  v.  Martin,  1  Camp.  425. 

5  8  Matteson  v.  Moulton.  11   Hun,  268.  79  N.   Y.  627. 

B9  Dunavan  v.  Flynn,  118  Mass.  537;  Pierce  v.  Kittredge,  115  Mass.  374; 
Storer  v.  Logan,  9  Mass.  55,  60. 


(Jh.   3]  FORMS    AND    VARIETIES    OF    ACCEPTANCE.  97 

Acceptances  on  a  separate  paper  are  of  two  classes:  Those  re- 
ferring to  a  bill  in  existence  at  the  time  of  the  acceptance;  and  those 
referring  to  a  bill  yet  to  be  drawn,  and  promising  to  accept  it  when 
drawn.  Tlieoretically,  as  forcibly  pointed  out  by  Professor  Ames, 
these  acceptances  are  in  defiance  of  the  general  principles  of  the  law 
merchant.  By  this  creation  of  the  law,  one  indorser  who  does  not  see 
the  outside  acceptance  has  no  remedy  against  the  acceptor,  while  his 
immediate  indorsee,  who  sees  and  discounts  the  bill  on  the  faith  of  the 
promise,  has  a  remedy  his  prior  indorser  had  not.*°  As  a  business 
expedient,  the  reasons  in  support  of  promises  to  accept  stated  by 
Chief  Justice  Marshall  apply  alike  to  both  classes.^^  "The  great  mo- 
tive," he  said,  "for  construing  a  promise  to  accept  as  an  acceptance, 
is  that  it  gives  credit  to  the  bill,  and  may  induce  a  third  person  te 
talce  it.  K  the  promise  be  not  known,  it  can  give  no  credit  to  the  bill; 
if  it  be  known,  an  absolute  promise  to  accept  will  give  all  the  credits 
to  the  bill  which  a  full  confidence  that  it  will  be  accepted  can  give  it 
As  Lord  Mansfield  said,  if  one  man  makes  an  absolute  promise  to  ac- 
cept his  bill,  the  drawer  or  any  other  person  may  show  it  upon  the  ex- 
change to  get  credit.  Thus,  the  promise,  when  shown,  gives  the  cred- 
it; the  merchant  who  makes  it  is  bound  by  it;  and  this,  too,  is  given 
as  well  by  a  letter  written  before  the  bill  as  one  written  afterwards." 
His  decision  then  closes  with  the  declaration  "that  a  letter  written 
within  a  reasonable  time  before  or  after  the  date  of  a  bill  of  exchange, 
describing  it  in  terms  not  to  be  mistaken,  and  promising  to  accept  it, 
is,  if  shown  to  the  person  who  afterwards  takes  the  bill  on  the  credit 
of  the  letter,  a  virtual  acceptance,  binding  on  the  person  who  makes 
the  promise."  The  reasons  for  this  rule  are  twofold.  One  is  the 
practical  one  that,  without  it,  much  embarrassment  would  be 
thrown  in  the  way  of  commercial  transactions.  A  knowledge  that 
a  draft  will  be  accepted  is  often  of  the  utmost  importance  to  the 
drawer  in  assisting  the  negotiation  of  bills  of  exchange;  and,  if 
the  promisor  was  not  bound  by  what  he  had  written,  extensive 
frauds  might  be  perpetrated.  The  view  which  the  courts  take  is 
that  the  rule  prevents  these  frauds,  and  accommodates  the  mercan- 
tile transactions  of  the  country."''     The  other  reason  was  based  in 

6  0  2  Ames.  Bills  &  N.  p.  78S. 
81  Coolidge  V.  Payson,  2  Wheat.  66. 
«2  Greele  v.  Parker,  5  Wend.  414. 
NEQ.  BILLS 7 


98  ACCEPTANCE    OF    BILLS    OF    EXCHANGE.  [Ch,   3 

its  origin  upon  the  great  authority  of  Lord  Mansfield  in  England," 
supported  in  the  United  States  by  the  opinion  of  Chief  Justice  Kent,** 
that  if  the  collateral  acceptance  be  shown  to  a  third  person,  so  as 
to  excite  credit,  and  to  induce  him  to  advance  money  on  the  bill, 
such  third  person  ought  not  to  suffer  by  the  confidence  excited. 
And  these  two  reasons  have  generally  prevailed  over  the  strongest 
objection  and  severest  criticism  of  the  opponents  of  the  theory,  so 
that  it  is  at  present  established  law.  It  is  the  credit  which  such 
acceptance  or  engagement  to  accept  has  given  to  the  bill  which  gives 
to  it  its  binding  operation.*" 

There  is  a  distinction  drawn  between  acceptances  on  separate 
paper  or  promises  to  accept  existing  bills  and  promises  to  accept 
bills  to  be  drawn  within  a  reasonable  time  in  the  future.  It  may  be 
urged  that  this  is  a  distinction  without  a  substantial  difference,  but 
traces  of  it  are  found  everywhere.  The  enactments  of  the  New 
York  statutes  which  are  declarative  of  the  general  law  are  such. 
The  statute  enacts:**  "Sec.  7.  If  an  acceptance  be  written  on 
paper  other  than  the  bill,  it  shall  not  bind  the  acceptor,  except  in 
favor  of  a  person  to  whom  such  acceptance  shall  have  been  shown, 
and  who  on  the  faith  thereof  shall  have  received  the  bill  for  a 
valuable  consideration.  Sec.  8.  An  unconditional  promise  in  writ- 
ing to  accept  a  bill  before  it  is  drawn  shall  be  deemed  an  actual 
acceptance  in  favor  of  every  person  who  upon  the  faith  thereof  shall 
have  received  the  bill  for  a  valuable  consideration,"  This  dis- 
tinction lies  rather  in  words  than  in  principle,  for  throughout  both 
classes  run  these  three  principles:  (1)  In  order  to  make  this  extrinsic 
promise  an  acceptance,  credit  must  be  given  to  it;  (2)  like  every 
other  promise  or  contract,  its  subject-matter  must  be  definite  or 

«3  Pillaus  v.  Van  Mierop,  3  Burrows,  lGG:i;  afterwards  overruled  in  John- 
son v.  Colliugs,  1  East,  98,  and  Pierson  v.  Dunlop,  Cowp.  573. 

64  McEvers  v.  Mason,  10  Johns.  206. 

«5  Thompson,  C.  J.,  in  Goodrich  v.  Gordon,  15  Johns.  6;  Cassel  v.  Dows,  1 
Blatchf.  335,  Fed.  Gas.  No.  2,502;  Worcester  Banli  v.  Wells,  8  Mete.  (Mass.)  107; 
Steman  v.  Harrison,  42  Pa.  St.  57;  Kuiz  v.  Renauld,  100  N.  Y.  25G,  3  N.  E. 
182;  Murdock  v.  Mills,  11  Mete.  (Mass.)  5;  Carnegie  v.  Morrison,  2  Mete. 
(Mass.)  381:  Jones  v.  Iowa  State  Bank,  34  111.  313;  Parker  v.  Greele,  2 
Wend.  (N.  Y.)  545.  This  is  very  common  as  a  statutory  provision  in  the  laws 
of  various  states. 

«6  Rev.  St.  N.  Y.  (8th  Ed.)  pp.  2499.  2500. 


Cll.   o]  FORMS    AND    VARIETIES    OF    ACCEPTANCE.  99 

reasonably  so;  and  (3)  the  promise  must  not  be  a  nudum  pactum. 
It  must  be  upon  a  consideration,  or,  to  express  it  as  it  commonly  oc- 
curs in  business  transactions,  the  holder  or  person  claiming  the 
benefit  of  the  promise  must  have  discounted  the  bill  upon  the  prom- 
ise. The  actual  acceptance  and  the  promise  to  accept  differ  mainly 
in  the  remedies  administered  upon  them.  With  the  actual  accept- 
ance there  is  but  the  remedy  against  the  acceptor  on  the  bill.  With 
the  promise  to  accept,  if  there  is  a  refusal  to  give  acceptance,  the 
promisor  is  sued  for  breach  of  ordinary  contract  for  whatever  dam- 
age the  holder  of  the  bill  has  actually  suffered,  limited  by  the 
amount  of  the  bill,  with  interest  and  costs. 

These  principles  exclude  from  the  operation  of  the  rule  cases 
where  the  indorsee  has  taken  the  bill  in  entire  ignorance  of  the 
promise,  or  where  the  promise  is  made  to  some  person,  not  the 
drawer  of  the  bill,  and  made  with  no  intention  of  its  being  shown 
as  a  means  of  exciting  credit^^  In  such  cases  the  promisor  is  ex- 
empted. 

«T  Grant  v.  Hunt,  1  C.  B.  44;  Stover  v.  Logan,  9  Mass.  58;  Gates  v.  Parker, 
43  Me.  544;  Pollock  v.  Helm,  54  Miss.  1;  Exchange  Bank  of  St.  Louis  v. 
Rice,  98  Mass.  288.  See,  contra,  Powell  v.  Monnier,  1  Atk.  Gil.  In  this  case, 
the  drawee  of  the  bill  kept  it  for  some  days,  entered  it  on  his  books  and 
wrote  a  letter  to  the  holders  of  the  bill  that  he  would  duly  honor  it.  nor  did 
he  express  any  suspicions  as  to  the  credit  of  the  drawer,  who  afterwards 
failed.  It  was  held  that  the  letter  constituted  a  sutHcient  acceptance  to  en- 
title the  plaintiffs  to  recover  against  the  executrix  of  the  drawee.  Similar 
to  this  is  the  case  of  Wynne  v.  Raikes,  in  which  it  was  held  that  where  a 
promise  of  acceptance  was  made  after  a  formal  refusal  to  the  holder,  such 
promise  being  made  to  the  drawer  after  the  bill  had  left  his  possession  and 
when  the  promise  could  not  furnish  an  inducement  to  an  indorser,  there  was, 
notwithstanding,  an  acceptance.  5  East,  514.  Where  there  has  been  an  ac- 
ceptance, an  action  may  be  brought  by  the  holder  of  the  bill;  but  if  there  has 
been  simply  a  promise  to  accept,  the  action  can  be  maintained  only  by  the 
one  to  whom  such  promise  was  made.  Henrietta  Nat.  Bank  v.  State  Nat. 
Bank,  80  Tex.  648,  16  S.  W.  321;  Exchange  Bank  of  St.  Louis  v.  Rice.  107 
Mass.  37;  Howland  v.  Carson,  15  Pa.  St.  453;  Carson  v.  Peacock.  4  Leg.  & 
Ins.  Rep.  (Pa.)  107;  Steman  v.  Harrison,  42  Pa.  St.  49;  Spaulding  v.  An- 
drews, 48  Pa.  St.  411;  Bissell  v.  Lewis,  4  Mich.  450;  Pillans  v.  Van  Mierop,  3 
Burrows,  1663;  Jones  v.  Council  Bluffs  Bank,  34  111.  313.  These  last  cases 
are  against  the  present  tenor  of  law.  Ilsley  v.  Jones,  12  Gray,  2G0;  Boyce  v. 
Edwards,  4  Pet.  Ill;    Carrollton  Bank  v.  Tayleur,  16  La.  (O.  S.)  490. 


100  ACCEPTANCE    OF    RILLS    OF    EXCHANGE.  [Ch.   3 

There  remains  but  one  more  question  to  be  answered,  and  that 
is  how  definite!}'  must  the  letter  describe  the  draft  to  be  binding 
in  law  as  an  acceptance  of  it.  The  letter  need  not  be  an  agree- 
ment in  terms  to  honor  the  draft.  It  may  be  read  in  the  light 
of  the  surrounding  circumstances,  which  may  be  used  by  the  court 
to  aid  in  ascertaining  its  purpose,  and  in  applying  and  interpret- 
ing its  language.  Tlie  absence  of  technical  promissory  words  is 
of  no  practical  moment  where  the  language  employed  is  such  as  to 
raise  an  imperative  legal  obligation.**  It  need  not  contain  a  par- 
ticular description  or  identification  of  the  bill  to  be  drawn.  It  is 
enough  if  it  can  be  shown  that  the  bill  was  drawn  in  pursuance 
of  the  authority  to  that  effect.  And  it  is  safe  to  say  from  an  ex- 
amination of  the  authorities  that  in  general  all  that  is  wanted  is  a 
general  power  to  draw  and  a  reasonable  intendment;  by  this  last  is 
meant  a  statement  of  facts  from  which  a  man  of  ordinary  prudence 
would  infer  that  the  power  related  to  the  bill  which  is  offered  for 
discount  upon  the  supposed  acceptance.  If  this  appears,  it  is  sufiS- 
cient. 

PAROL  ACCEPTANCE  OF  A  BILL. 

53.  In  tlie  absence  of  a  statutory  intervention,  it  is  the 
common-law  rule  that  an  unequivocal  parol  promise  to  ac- 
cept a  specific  existing  bill  is  binding.  But  a  promise  to 
accept  a  future  bill,  even  though  the  bill  be  taken  by  the 
holder  upon  the  faith  and  credit  of  such  promise,  is  not 
binding  as  an  acceptance. 

It  is  proper  to  say  in  the  beginning  that  the  doctrine  of  parol 
acceptances  should  be  received  with  extreme  caution.  It  is  contrary 
to  the  theory  of  negotiability  because  it  is  not  an  indicium  upon 
the  bill,  and  to  the  general  policy  of  law  because  of  the  vague  and 
often  uncertain  evidence  by  which  the  acceptance  itself  is  proved. 
But  it  is  undoubtedly  the  law  that  oral  acceptances  of  existing 

88  Barney  v.  Worthington,  37  N.  Y.  112;  Bank  of  Michigan  v.  Ely,  17  Wend. 
508,  512;  Ulster  County  Bank  v.  McFailan,  5  Hill,  432;  Valle  v.  Ceire,  3G 
Mo.  575;  Nagle  v.  Lyman,  14  Cal.  451;  Nelson  v.  First  NaL  Bank,  48  111. 
39;  Nevada  Bank  v.  Luce,  13'J  Mass.  488,  1  N.  E.  926. 


Cll.   3]  PAKOL    ACCEPTANCE    OF    A    BILL  101 

bills  ®"  are  valid  and  binding  acceptances.  The  reasons  given  for 
this  rule  are  much  the  same  as  those  given  for  separate  acceptances 
in  writing.  A  verbal  promise  is  treated  as  an  acceptance  because 
sound  principles  of  morality  require  that  one  who  promises  another, 
although  by  parol,  to  accept  a  particular  bill  of  exchange,  and  there 
by  induces  him  to  advance  his  money  upon  such  bill  in  reliance  upon 
such  promise,  should  be  held  to  make  good  his  promise.  The  party 
advances  money  upon  an  original  promise  upon  a  valuable  con- 
sideration, and  the  promisor  is  bound  to  carry  out  his  undertaking. 
Whether  it  is  held  to  be  an  acceptance,  or  whether  he  is  subject  to 
damages  for  a  breach  of  his  promise  to  accept,  or  whether  he  is 
held  to  be  estopped  from  impeaching  his  word,  is  a  matter  of  form 
merely.  The  result  in  either  event  is  to  compel  the  promisor  to  pay 
the  amount  of  the  bill  with  interest. ■^*'  It  would  seem  that  this 
reason  would  apply  alike  to  instances  of  existing  bill  and  of  non- 
existing  bill,  yet  the  cases  make  a  distinction  between  them.  And 
with  all  respect  to  the  able  judges  who  have  laid  the  rule  down,  it 
is  submitted  that  there  is  no  greater  moral  reason  for  paying  an 
existing  bill  upon  a  verbal  promise  to  pay  it  than  a  bill  subse 
quently  drawn  and  discounted  upon  the  faith  that  it  would  be  paid 
when  drawn.  Yet  the  courts  say  that  a  verbal  promise  to  pay  a 
non-existing  bill,  even  with  the  qualification  that  the  bill  is  subse- 
quentlj^  taken  on  the  faith  of  it,  does  not  amount  to  an  acceptance, 

69  Scudder  v.  Union  Nat.  Bank,  91  U.  S.  406;  Sturges  v.  Fourth  Nat.  Bank. 
75  111.  595;  Dull  v.  Bricker,  7G  Pa.  St.  255;  Nelson  v.  First  Nat.  Bank,  48  111 
S7;    Elliott  V.  Miller,  8  Mich.  132. 

TO  Townsley  v.  Sunrall,  2  Pet.  170;  Boyce  v.  Edwards,  4  Pet.  Ill;  Scudder 
V.  Union  Nat.  Bank,  91  U.  S.  406;  Scott  v.  Pilkington,  15  Abb.  Prac.  280; 
Bissell  v.  Lewis,  4  Mich.  4-50;  Williams  v.  Winaus,  14  N.  J.  Law,  339;  Bank 
of  Ireland  v.  Archer,  11  Mees.  &  W.  383.  In  this  case,  a  party  being  re- 
quested to  accept  a  bill  to  be  subsequently  made,  said:  "Send.it  for  ac- 
ceptance as  usual,  remitting  proceeds  at  the  same  time,  and  I  will  advise  my 
partner."  In  an  action  on  the  bill  it  was  held  that  a  parol  promise  to  accept 
a  bill  of  exchange  afterwards  drawn,  on  the  faith  of  which  promise  the  bill 
is  discounted,  does  not  amoimt  to  an  acceplin'-.^  .Tohnson  v.  CoUings,  1  East, 
98;  Kennedy  v.  Geddes,  8  Port.  (Ala.)  263;  Mercantile  Bank  v.  Cox,  38  Me. 
500;  Plummer  v.  Lyman,  49  Me.  229;  Wilson  v.  Clements,  3  Mass.  1;  Edson 
V.  Fuller,  22  N.  H.  183,  188;  Wakefield  v.  Greenhood,  29  Cal.  600;  Pike  T. 
Irwin,  1  Sandf.  14;  Taylor  v.  Drake,  4  Strob.  (S.  C.)  431.  » 


102  ACCEPTANC  K    (»F    lULLS    OK    KXiIlANGE.  [Cll.   3 

because  in  order  to  constitute  an  acceptance  there  ought  to  have 
been  a  bill  in  existence  to  be  accepted.  And  to  hold  that  the  same 
act  would  be  an  acceptance  or  not,  according  to  the  varying  rela- 
tions of  the  subsequent  holders  of  the  bill,  would  introduce  a  strange 
anomaly  and  confusion  into  the  relation  of  the  parties  to  the  bill, 
the  drawee  being  an  acceptor  as  to  some  and  not  as  to  the  other  in- 
dorsees. There  is  one  further  objection  to  be  noted  to  parol  ac- 
ceptances which  is  found  in  the  cases.  It  is  that  a  parol  acceptance 
is  obnoxious  to  that  provision  of  the  statute  of  frauds  which  pro- 
vides that  all  promises  to  answer  for  the  debt  of  another  shall  be  in 
writingand  signed  by  thepromisor.  It  is  maintained  that  an  acceptance 
is  such  a  promise,  and  particularly  in  the  case  when  it  is  an  accom- 
modation acceptance,  because  then  the  acceptor  merely  guaranties 
some  one  else's  debt.  But  despite  the  respectable  authority  su[>- 
porting  this  view,  its  reasons  do  not  seem  sound.  In  issuing  a  bill 
the  drawer  says  to  the  drawee,  "Pay  so  much  money  to  the  payee, 
and  I  will  repay  it  to  you,"  and  the  drawee  in  his  acceptance  there- 
upon promises  to  pay  the  money  called  for  in  the  bill  to  the  payee. 
The  promises  are  thus  original  and  indejx'udeut.  And  if  money 
is  paid  on  the  faith  of  it,  there  is  an  original  consideration  moving 
between  the  parties  to  the  contract.  Damage  to  the  promisee 
constitutes  as  good  a  consideration  as  benefit  to  the  promisor.  And 
where  there  is  a  substantial  credit  given  by  the  party  to  the  drawer 
upon  the  bill,  and  the  party  parts  with  his  present  rights  at  the 
instance  of  the  promisee,  this  XJi'omise  is  substantially  a  new  and 
independent  one,  and  not  a  mere  guaranty  of  the  existing  promise 
of  the  drawer.  The  object  of  the  promise  is  to  induce  the  party 
to  take  the  bill  upon  the  credit  of  the  promise,  and,  if  he  so  take  it, 
it  binds  the  promisor.^^ 

ACCEPTANCE  FOR  HONOR  OR  SUPRA  PROTEST. 

54.  DEFINITION — An  acceptance  supra  protest  is  an 
undertaking  by  a  stranger  to  the  bill,  after  protest,  for  the 
benefit  of  all   parties  subsequent  to  him  for  whose  honor 

71  Towusley  v.  Siunrall,  2  Pet.  170. 


Ch.   .3]  ACCEPTANCE    FOR    HONOR   OR    SUPRA    PROTEST.  103 

it  is   made,  and  conditioned  to  pay  the  bill  -when  it  be- 
comes due  if  the  original  dra"wee  does  not. 

56.  An  acceptance  supra  protest  may  be  made — 

(a)  After  dishonor  by  non-acceptance. 

(b)  After   protest  for  better  security  after  accept- 

ance. 

The  acceptance  for  honor  is  an  exception  to  the  rule  (supra,  § 
46)  that  no  one  but  the  drawer  can  be  an  acceptor.  It  is  not 
commonly  met  with  in  this  country,  and  therefore  it  is  our  purpose 
to  outline  without  much  discussion  the  rules  concerning  it. 

In  its  nature  it  is  a  sort  of  conditional  acceptance,  the  contract 
being,  as  we  shall  hereafter  see  (see  post,  §  72),  to  pay  if,  upon 
further  presentment  of  the  bill  to  the  drawee  for  payment  at  ma- 
turity, it  is  again  dishonored  and  duly  protested.  The  bill  must 
in  the  first  instance  be  presented  to  the  drawee  and  protested,  be- 
cause the  drawer  and  indorsers  have  a  right  to  a  presentment 
to  and  demand  of  the  drawee  and  also  a  right  to  the  full  legal  form 
of  protest.^^  But  protest  once  being  made,  any  person  not  a  party 
to  the  bill  may  accept  it  for  the  honor  of  any  other  party  to  it,  or 
there  may  be  successive  acceptors  to  the  bill  for  the  honor  of  diifer- 
ent  parties  to  it,^^  or  any  one  acceptor  may  accept  for  any  or  all 
parties  to  the  bill.  The  method  of  making  an  acceptance  for  honor 
is  for  the  party  to  appear  before  a  notary  public  and  declare  that 
he  accepts  such  protested  bill  in  honor  of  the  drawer  or  indorsers, 
as  the  case  may  be,  and  he  then  in  some  form  of  writing  signifies 
such  acceptance.  Usual  forms  are  "Accepts  S.  P.,"  or  "Accepted 
for  the  honor  of  X."  As  soon  as  this  form  is  complete,  it  is  the 
duty  of  the  acceptor  for  honor  to  notify  the  parties  to  the  bill  for 
whose  honor  he  has  accepted.  Of  course,  no  holder  is  bound  to 
take  the  acceptance  of  such  an  acceptor,  but  having  once  accepted 
it  he  is  bound  by  it  and  cannot  sue  such  party  until  the  maturity 
of  the  bill  and  its  dishonor  by  the  acceptor  supra  protest.^* 

There  is  a  species  of  acceptance  for  honor  known  as  the  protest 

'2  story,  Bills,  §  256. 

T8  Konig  V.  Bayard,  1  Pet.  250. 

'4  Williams  v.  Germaine,  7  Barn.  &  0.  468,  1  Man.  &  R.  394, 


104  ACCKPTANCK    OF    BILLS    OF    KXCHAM.K.  [Ch.    3 

for  better  security.  According  to  Mr.  Cliitty/"  "The  custom  of 
merchants  is  stated  to  be  that  if  the  drawee  of  a  bill  of  exchange 
abscond  before  the  day  when  the  bill  is  due,  the  holder  may  protest 
it  in  order  to  have  better  security  for  its  payment,  and  should  give 
notice  to  the  drawer  and  indorsers  of  the  absconding  of  the  drawee; 
and  if  the  acceptor  of  a  foreign  bill  become  bankrupt  before  it  is  due, 
it  seems  the  holder  may  also  in  such  case  protest  for  better  security. 
The  neglect  to  make  this  protest  will  not  affect  the  holder's  remedy 
against  the  drawer  and  indorsers,  and  its  principal  use  appears 
to  be  that  by  giving  notice  to  the  drawer  and  indorsers  of  the 
situation  of  the  acceptor,  or  by  which  it  is  become  improbable  that 
payment  will  be  made,  they  are  enabled  by  other  means  to  provide 
for  the  payment  of  the  bill  wiien  due."  ''* 

Tscbit.  BiUs,  383. 

T«  Daniel,  Neg.  Inst  §  530.    See,  also,  Ex  parte  Wackerbarth,  5  Ves.  574. 


Ch.  4]  FORMAL    REQUISITES.  105 

CHAPTER  IV. 

INDORSEMENT. 

56.  Dennition. 

57.  Formal  Requisites. 
58-59.    Indorsement  in  Blank. 
60-61.    Indorsement  in  Full. 

62-64.    Indorsement  without  Recourse,  Conditional  and  Restrictive  Indorse- 
ment. 

65.  Nature  of  Indorsement. 

66.  Requisites  of  Indorsement. 
67-6S.    Anomalous   Indorsements. 

DEFINITION. 

56.  INDORSEMENT— Is  the  writing  of  the  name  of  the 
inaorser  on  the  instrument  with  the  intent  either  to  trans- 
fer the  title  to  the  same,  or  to  strengthen  the  security  of 
the  holder  by  assuming  a  contingent  liability  for  its  future 
payment,  or  both.  It  strictly  applies  only  to  negotiable 
instruments. 

FORMAL  REQUISITES. 

57.  The  formal  requisites  of  an  indorsement  are: 

(a)  Though  usually  on  the  back  of  the  instrument 

it  is  valid  on  its  face,  but  it  must  be  some- 
w^here  upon  it.  When  by  reason  of  rapid 
circulation  the  instrument  becomes  filled  w^ith 
indorsements,  the  law  merchant  permits  the 
holder  to  paste  on  a  slip  of  paper  for  his  ow^n 
and  subsequent  indorsements.  This  is  called 
an  allonge. 

(b)  Any  form   of  w^ords  w^ith   the   signature  from 

w^hich  the  intent  of  the  holder  to  indorse 
may  be  gathered  is  a  sufficient  indorsement. 
The  usual  signature  of  the  indorser  is  the 
common  form  of  indorsement,  but  any  em- 
blem of  that  signature  will  sufB.ce. 


106  INDORSEMENT.  [Ch.    4 

An  indorsomont  is  classed  by  itself  as  a  distinct  body  of 
contract  rights  and  liabilities.  It  has  its  origin  in  and  is  confined 
to  the  theory  of  negotiability.^  In  the  illustration  under  §  10, 
which  we  have  so  often  referred  to,  B  pays  A  £1,000,  and  A  gives 
the  bill  to  him;  D  pays  B  £1,000,  and  B  indorses  the  bill  to  him; 
and  E  pays  D  £1,000,  and  D  indorses  the  bill  to  him.  In  each  in- 
stance B,  D,  and  E  get  what  for  their  purposes  is  as  good  and  better 
than  £1,000  in  gold.  And,  in  turn,  as  B  or  D  was  paid  the  £1,000, 
and  indorsed  the  bill,  he  assumed  some  liability.  He  did  all  he 
could  to  assure  the  indorsee,  who  paid  the  £1,000  to  him,  that  he 
in  turn  would  get  his  money.  He  said  to  the  indorsee:  "You  give 
me  £1,000  in  gold,  which  cannot  be  transported  because  of  its  weight, 
or  £1,000  in  bank  notes,  which  are  inconvenient  to  carry  because 
of  their  danger  of  being  lost,  and  I  will  give  you  a  claim  payable  to 
you  alone,  and  which  at  New  York  or  Charleston  or  Jamaica  will  be 
just  as  good  to  you  as  the  £1,000  in  gold  or  bank  notes  would  have 
been.  Y'ou  may  safely  take  this,  because  if  C  does  not  accept  or 
pay  this,  or  A  does  not  pay  this  as  drawer,  I,  to  whom  you  have  paid 
the  £1,000,  will  repay  it  to  you."  ^  "A  payee  or  subsequent  holder," 
says  Professor  Ames,  "instead  of  holding  a  bill  and  collecting  it  at 
maturity,  may  wish  to  transfer  his  interest  in  it  to  another,  in  which 
case  he  indorses  the  bill.  He  writes  and  signs  upon  the  back  of 
the  bill  an  order  directing  its  payment  to  the  desired  transferee. 
The  order  is  written  with  mercantile  conciseness:  Tay  A  [Signed] 
X,' — the  other  terms  being  contained  upon  the  face  of  the  bill.  The 
custom  of  merchants  has  attached  to  this  order  a  liability  similar 

1  Orrick  v.  Colston,  7  Grat.  195:  Bank  of  Marietta  v.  Pindall,  2  Rand.  (Va.) 
47.5.  In  Whistler  v.  Forster,  whicli  was  an  action  by  the  indorsee  of  a  check 
against  the  drawer,  it  was  held  that  the  holder  of  a  bill  payable  to  order  must 
obtain  an  indorsement  and  is  afCected  by  notice  of  fraud  until  he  does  so,  and 
until  such  indorsement  is  obtained  he  has  no  better  right  than  his  assignor. 
14  C.  B.  (N.  S.)  248.  In  an  action  against  certain  parties  as  the  indorsers  of 
a  bill  it  was  claimed  that  such  parties  were  liable,  even  though  the  indorse- 
ment was  shown  to  be  a  forgery,  on  the  ground  that  the  writing  must  have 
been  by  the  defendant's  authority.  This  was  held  not  to  be  an  indorsement 
such  as  would  entitle  the  plaintiffs  to  recover.  Moxon  v.  Pulling,  4  Camp.  50; 
Dunning  v.  Heller,  103  Pa.  St.  209. 

2  Ingalls  V.  Lee,  9  Barb.  647;  Hill  v.  Lewis,  1  Salk.  132;  Evans  v.  Gee,  11 
Pet.  80. 


Ch.    4]  FORMAL    REQUISITES.  107 

to  that  which  attaches  to  the  order  of  the  drawer.  Bj  an  indorse- 
ment, therefore,  a  party  not  only  passes  his  interest  in  the  bill  to 
another,  but  also  pledges  his  credit  for  the  honor  of  the  bill.  In 
other  words,  an  indorsement  is  at  once  a  transfer  and  a  contract." 

The  student  must  fully  grasp  this  idea, — that  the  indorsement 
is  a  contract,  and  a  contract  to  which  the  law  merchant  and  the 
common  law  have  appended  very  peculiar  conditions.  It  is  a  con- 
tract something  in  the  nature  of  a  guaranty,^  something  in  the 
nature  of  a  warranty,  and  to  the  liability  under  which  the  laws 
have  attached  the  very  unusual  conditions  of  presentment,  demand, 
and  notice  of  dishonor.*  It  is,  to  be  sure,  an  evidence  of  a  transfer 
of  title,  but  it  is  principally  a  development  of  a  form  of  contract  at 
the  hands  of  the  creators  of  the  body  of  rules  of  the  law  merchant. 
We  may  be  pardoned  in  referring  again  to  the  illustrations  under 
§§  12  and  13.  In  these  instances  the  drawer  or  maker  con- 
tracted to  pay  "John  Smith,  or  his  order,"  meaning  John  Smith,  or 
some  person  to  whom  John  Smith  especially  directed  the  sums  of 
m6ney  called  for  in  the  instruments  should  be  paid.  The  only 
construction  of  this  would  be  that  John  Smith  must  direct  payment. 
He  must  direct  it  in  writing.  Until  he  does  so  direct  it,  and  evi- 
dences this  direction  by  writing  it  on  the  instrument,  the  title  to 
the  instrument,  and  the  right  to  the  sum  of  money  called  for  by 
its  terms,  remain  in  him.  But,  when  he  does  direct  it  by  indorsing 
it,  that  (under  the  law  merchant)  shows  to  all  the  world  that  eiohn 
Smith  has  signified  his  wish  that  it  should  be  paid  to  some  person. 

In  the  place  and  form  of  the  words  of  the  indorsement,  the  law 
looks  rather  to  the  intention  of  the  parties  than  to  a  strict  com- 
pliance with  its  usual  forms.  According  to  the  usual  method,  an 
indorsement,  as  its  name  implies,  is  written  on  the  back  of  the 
instrument.  And  indeed  this  usual  method  and  this  original  mean- 
ing carry  with  them  such  force  that  it  has  been  held  that  where 
one  alleges  that  a  note  was .  "indorsed"  he  may  be  presumed  to 
mean  that  there  was  writing  of  some  kind  on  its  back.^     But  neither 

8  Oakley  v.  Booi-man,  21  Wend.  588;  Kingsland  v.  Koeppe,  137  111.  344,  28 
N.  E.  48;  Id.,  Johns.  Cas.  Bills  &  N.  118;  Do  Pauw  v.  Bank  of  Salem,  126 
Ind.  553,  25  N.  E.  705,  and  2G  N.  E.  151;  Id.,  Johns.  Cas.  Bills  &  N.  128. 

*  Osgood's  Adm'rs  v.  Ortt,  17  Fed.  575,  Johns.  Cas.  Bills  &  N.  107. 

6  Gorman  v.  Ketchum,  33  Wis.  427. 


108  INDOKSEMENT.  [Ch.   4 

this  customary  method  nor  this  original  meaning  are  allowed  by 
the  law  to  prevail  over  the  purpose  and  intention  of  the  parties. 
And  an  indorsement  elsewhere  upon  the  instrument  is  as  much  an 
indorsement  as  though  written  upon  its  back.*  It  may,  for  exam- 
ple, be  upon  its  face,'  or  it  may  be  and  frequently  is  where  in- 
dorsements have  covered  the  back  of  the  paper  upon  the  extension 
of  the  instrument  referred  to  in  the  principle  text  as  an  allonge.* 
But  it  must  be  somewhere  upon  the  bill  or  note,  for  if  upon  a  sepa- 
rate paper  the  transfer  is  not  an  indorsement,  but  an  assignment," — 
and  the  transferer  cannot  avail  himself  of  the  privileges,  nor  is  he 
subject  to  the  rules  governing  indorsement.  So,  too,  in  the  form  of 
words  of  an  indorsement,  the  law  looks  to  the  intention  rather  than 
the  method  of  expression  of  the  parties.  For  while  a  signature  or 
some  of  the  forms  of  words  we  shall  hereafter  discuss  are  the 
usual  forms,  yet  initials,  or  figures,"  or  writing  in  pen  or  in  pencil," 
or  a  mark,  if  they  evidence  an  intention  to  indorse,  can  create  a 
binding  indorsement.  This  rule  is  usually  the  subject  of  discussion 
in  interpreting  words  of  transfer  on  the  back  of  instruments,  which 
seem  to  imply  an  assignment  rather  than  indorsement.  The  most 
often  quoted  instance  of  such  an  expression  is,  "I  hereby  assign  this 
draft,''  which  Gurney,  B.,  declared  "to  amount  to  nothing  more 
than  an  ordinary  indorsement."  ^^      And  the  interpretation  given 

« In  Young  v.  Glover,  the  defendants  wrote  cheir  names  on  the  face  of  an 
accepted  bill,  under  the  name  of  the  acceptor.  It  was  contended  that  this 
was  not  an  indorsement  according  to  the  custom  of  merchants.  The  intention 
of  the  defendants  to  assume  liability  as  indorsers  being  clear,  there  was  held 
to  be  a  good  indorsement,  and  that  the  place  of  writing  was  immaterial.  3 
Jur.  (N.  S.)  G37;   Schweuk  v.  Yost,  9  Wkly.  Notes  Cas.  (Pa.)  16. 

^  Ex  parte  Yates,  27  Law  J.  Baukr.  9;  Com.  v.  Butterick,  100  Mass.  12; 
Rex  V.  Bigg,  3  P.  Wms.  419. 

8  Folger  V.  Chase,  18  Pick.  (13 ;   French  v.  Turner,  15  lud.  159. 

9  Fenn  v.  Harrison,  3  Term  II.  757.  In  this  case  the  indorsement  was  upon 
a  mortgage  which  was  given  with  the  note  as  collateral  security,  and  was  to 
this  effect:  "I  hereby  assign  the  within  mortgage  and  notes  therein  described." 
Tills  was  held  not  to  be  a  proper  indorsement,  under  the  requirement  that  it 
should  have  been  made  "thereon,"  or  "on  another  paper  annexed,  *  *  * 
when  there  are  many  successive  indorsements  to  be  made."    Story,  Bills,  §  204. 

10  Brown  v.  Butchers'  &  Drovers'  Bank,  G  Hill  (N.  Y.)  443. 

11  Geary  v.  Physic,  5  Barn.  &  C.  234. 

12  Richards  v.  Frankum,  9  Car.  &  P.  221.  . 


Ch.   4]  FORMAL    REQUISITES.  109 

by  the  courts  to  such  a  form  of  words,  written  on  instruments  in 
the  place  where  indorsements  are  usually  found,  is  that  the  trans- 
ferer, in  making  the  writing  evidencing  a  transfer,  intended  such 
a  transfer  as  is  usually  made  of  such  instruments.  In  other  words, 
he  may  be  reasonably  presumed  to  have  intended  to  turn  over  the 
paper  in  the  usual  business  way,  although  he  did  not  choose  business 
words  peculiarly  appropriate  for  that  purpose.  The  usual  business 
way  is  by  indorsement.  Therefore  it  is  reasonable  to  presume  that 
an  indorsement  rather  than  an  assignment  was  intended.  And  so 
such  words,  unless  they  contain  expressions  clearly  showing  an 
intention  to  exempt  the  transferer  from  an  indorser's  liability,  are 
treated  as  an  indorsement.^^  It  may  be  that  there  is  one  exception 
to  the  foregoing  rule,  though  there  is  weight  of  contrary  authority. 
It  is  that,  where  one  contracts  in  the  form  of  a  guaranty  on  the 
back  of  a  bill  or  note,  he  cannot  be  made  liable  as  an  indorser.^* 
A  guaranty  is  declared  by  the  courts  tO'  mean  a  guaranty,  and  not 
an  indorsement.^ °      And  this,  one  rule  of  interpretation  differs  from 

13  Sears  v.  Lantz,  47  Iowa,  658;  Shelby  v.  Judcl,  24  Kan.  166;  Fassin  v. 
Hubbard,  55  N.  Y.  465;   Hall  v.  Toby,  110  Pa.  St  318,  1  Atl.  369. 

14  In  an  action  on  a  promissory  note  it  was  shown  that  the  payee  of  a  note 
transferred  the  same  to  a  third  party,  having  first  written  over  his  signature: 
"I  hereby  guaranty  the  within  note."  It  was  held  by  the  court  that,  where 
the  name  of  the  payee  was  indorsed  on  the  back  of  the  note  in  no  other  form 
than  as  a  signature  to  a  guaranty  fully  written  out,  this  was  not  such  an  in- 
dorsement as  authorized  a  subsequent  holder  to  sue  upon  it  as  indorsee.  Bel- 
cher V.  Smith,  7  Gush.  (Mass.)  482.  And  see  Tuttle  v.  Bartholomew,  12  Mete. 
(Mass.)  452;  Fullerton  v.  Hill,  48  Kan.  558,  29  Pac.  583;  Id.,  Johns.  Gas.  Bills 
&  N.  124.  As  to  liabilities  of  guarantors  and  sureties,  see  Gridley  v.  Gapen, 
72  111.  11.  Johns.  Gas.  Bills  &  N.  209;  Read  v.  Gutts,  7  Me.  186,  Johns.  Gas. 
Bills  &  N.  210;  Temple  v.  Baker  (Pa.  Sap.)  17  Atl.  516.  For  distinction  be- 
tween guarantor  and  surety,  see  La  Rose  v.  Logansport  Nat.  Bank,  102  Ind. 
332,  1  N.  E.  805;  Id.,  Johns.  Gas.  Bills  &  N.  213. 

16  Where  the  payment  of  a  note  is  guarantied  subsequent  to  its  delivery 
there  must  be  a  distinct  consideration.  Had  the  guaranty  been  written  before 
the  delivery,  no  other  consideration  would  have  been  necessary  than  that  im- 
plied in  the  note.  By  the  statute  of  the  state,  since  the  guaranty  did  not  ex- 
press any  consideration,  it  is  void.  Moses  v.  Lawrence  Go.  Bank,  149  U.  S. 
298,  13  Sup.  Ct.  900.  And  see  Leonard  v.  Vredenburg,  8  Johns.  (N.  Y.)  29; 
Tinker  v.  M'Cauley,  3  Mich.  188;  Phelps  v.  Church,  65  Mich.  231,  32  N.  W. 
30;  Hunt  v.  Adams.  7  Mass.  518;  Spaulding  v.  Putnam,  128  Mass.  363;  Na- 
tional Bank  of  Commonwealth  v.  Law,  127  Mass.  72;  Dubois  v.  Mason,  Id.  37. 


110  INDORSEMENT.  [Ch.   4 

the  other  in  that  the  words  are  not  doubtful  words  of  transfer,  but 
are  plain  words,  having  a  plain  legal  meaning.  Hence  it  is  not 
proper  for  courts  to  seek  to  construe  the  meaning  of  words  which 
are  already  settled  beyond  dispute.  It  is  only  their  province  to 
enforce  the  contract  in  the  clear  words  in  which  it  stands,  and  that 
contract  they  will  enforce  as  a  guaranty.^' 

INDORSEMENT  IN  BLANK. 

58.  AN  INDORSEMENT  IN  BLANK— Means  that  the 
instrument  is  to  be  paid  to  ■whomsoever  may  hold  it. 
There  may  be  successive  indorsements  in  blank. 

59.  The  indorsee  in  blank,  or  any  subsequent  bona  fide 
holder,  may  -write  over  an  indorsement  in  blank  any  con- 
tract consistent  -with  the  character  of  the  indorsement. 

In  form  an  indorsement  in  blank  consists  in  writing  merely  the 
name  of  the  payee  or  indorser  upon  the  back  of  the  instrument. 
Thus,  if  John  Smith,  in  the  illustration  mentioned  in  §  12,  indorsed 
the  instrument  in  blank,  he  would  write  simply  "John  Smith"  on 
the  back  of  it  How  the  courts  have  interpreted  this  appears  from 
Peacock  v.  Khodes^^  and  Grant  v.  Vaughan,^*  which  have  been  gen- 
erally adopted  as  the  law. 

Peacock  v.  Rhodes  was  a  c^se  of  a  bill  indorsed  in  blank  by  the 
payee  to  a  third  person,  and  stolen  from  the  third  person,  and  re- 
ceived by  a  bona  fide  purchaser  for  value.  Lord  Mansfield  said, 
"There  is  no  difference  between  a  note  indorsed  in  blank  and  one 
payable  to  bearer;"  and  it  was  deemed  that  such  a  bill  is  to  be  treated 
as  so  much  cash,  unless  the  payee  chooses  by  a  specific  indorsement 
to  some  person  to  restrain  its  currency.  The  court  construed  the 
contract  to  mean  that  the  payee  might  follow  out  the  contract  em- 

18  Brown  v.  Ciirtiss,  2  N.  Y.  225.  But  see  Tlpham  v.  Prince,  12  Mass.  14; 
Manrow  v.  Durham,  3  Hill  (N.  Y.)  584,  and  cases  cited;  Barrett  v.  May.  2 
Bailey  (S.  C.)  1;  Partridge  v.  Davis,  20  Vt.  449;  Vanzant  v.  Arnold,  31  Ga. 
210;  Judson  v.  Gookwin,  37  IlL  2SG,— holding  a  contrary  doctrine  to  the  ap- 
parently reasonable  doctrine  of  the  text. 

IT  Peacock  v.  Rhodes,  2  Doug.  G33. 

18  Grant  v.  Vaughan,  3  Burrows,  1516. 


Ch.   4]  INDORSEMENT    IN    BLANK.  Ill 

bodied  in  the  bill,  "Pay  to  John  Smith,  or  such  person  as  he  directs," 
and  that,  when  he  so  indorsed,  he  was  deemed  to  say,  "You  may 
pay  to  any  one  who  holds  the  bill."  In  Grant  v.  Vaughan,  the 
maker  of  a  note  to  bearer,  was  sued  by  Grant,  who  gave  value  for 
the  note  to  a  person  who  had  found  it,  and  who  had  no  right  to 
it.  It  was  contended  that  Grant  could  only  recover  from  the  person 
from  whom  he  got  the  note.  But  the  court  construed  the  contract 
of  Vaughan  otherwise/®  In  these  cases  the  law  goes  to  the  limit 
that  the  true  owner  cannot  recover  in  trover  from  the  bona  fide 
holder. 

The  student  must  keep  in  mind  that  this  relates  only  to  an  instru- 
ment held  by  a  bona  fide  holder.^"  Where  the  instrument  is  not  in  the 
possession  of  a  bona  fide  holder,  but  of  the  finder  or  the  thief,  this 
extreme  rule  does  not  apply.  The  instrument  is,  then,  like  all  other 
property.  It  cannot  be  enforced  by  the  wrongful  holder.  But, 
when  once  it  is  in  the  hands  of  the  bona  fide  holder,  then  it  is 
treated  as  money  in  the  ordinary  course  of  business.  On  account 
of  its  currency,  it  cannot  be  recovered  after  it  has  passed  in  cur- 
rency. Alike  in  case  of  money  and  of  paper  indorsed  in  blank, 
where  either  has  been  stolen  or  found,  the  true  owner  cannot  re- 
cover after  it  has  been  paid  away  fairly  and  honestly  upon  a  valua 
ble  consideration,  because  it  is  necessary  for  the  purposes  of  com- 
merce that  its  currency  should  be  established  and  secured. 

Very  much  like  this  general  power,  vested  in  the  payee  or  subse- 
quent indorser,  to  vest  any  lawful  holder  with  the  power  to  enforce 
the  payment  of  the  instrument, '^^  is  the  power  conferred  upon  the  in- 

19  See,  also,  Miller  v.  lla.ce,  1  Burrows,  452.  This  was  an  action  in  trover 
to  recover  a  bank  note  payable  to  W.  F.  or  bearer,  on  demand.  Tbe  note  was 
stolen,  and  later  came  into  the  plaintiff's  possession.  Upon  notice  of  the  rob- 
bery, W.  F.  ordered  payment  stopped  on  the  note.  It  was  held  that  such  note, 
when  it  came  into  the  hands  of  a  third  party,  for  value  and  without  notice, 
could  not  be  followed. 

20  As  to  who  is  a  bona  fide  holder,  see  .Tohnson  v.  Way.  27  Ohio  St.  374, 
Johns.  Cas.  Bills  &  N.  185;  Dresser  v.  Missouri  &  I.  Ry.  Const.  Co.,  93  U.  S. 
92,  Johns.  Cas.  Bills  &  N.  187;  Brook  v.  Teague,  52  Kan.  119,  34  Pac.  347; 
Id.,  Johns.  Cas.  Bills  &  N.  189;  Lenheim  v.  Fay,  27  Mich.  70;  Rickle  v.  Dow, 
39  Mich.  91. 

«i  In  this  connection,  see  the  case  of  Trimbey  v.  Vignier,  in  which,  under  the 
French  law,  it  appears  that  an  indorsement  in  blank  was  insufficient  to  pass 


112  INDORSEMENT.  [Ch.   4 

dorsee  in  blank  to  write  over  the  indorsement  any  contract  consistent 
with  the  character  of  the  instrument  The  authority  followed  in 
most  jurisdictions  is  Russell  v.  Langstaffe.^^  There  the  defendant  in- 
dorsed his  name  in  blank  on  five  copper-plate  notes,  the  body  of  the 
notes  being  at  that  time  not  filled  out.  Upon  the  trial,  on  behalf  of  the 
defendant,  it  was  urged  that,  because,  these  notes  were  blank  at 
the  time  of  the  indorsement,  they  were  not  promissory  notes;  and 
that  no  subsequent  act  could  alter  the  original  nature  or  operation 
of  the  defendant's  signature,  which,  when  written,  was  a  mere 
nullity.  Lord  Mansfield,  in  deciding  the  case,  used  these  often- 
quoted  words:  "The  indorsement  on  a  blank  note  is  a  letter  of 
credit  for  an  indefinite  sum."  The  defendant  said:  "Trust  Galley 
to  any  amount,  and  I  will  be  his  security."  The  amount  of  the 
main  instrument  being  left  blank,  an  authority  to  fill  it  in  for  any 
sum  was  implied.  The  terms  of  the  body  of  the  note  or  bill  are 
the  principal  terms  of  the  contract  of  indorsement,  and  nothing  in- 
consistent with  these  can  be  implied  from  the  indorsement  Says 
Judge  Cowen:  ^'  "The  holder  may  put  the  blank  paper  in  any  form 
which  shall  accord  with  the  intent  of  the  names,  either  as  makers, 
drawers,  payees,  or  indorsers.  This  power  of  the  bona  fide  holder 
depends  upon  the  intent  of  the  parties  not  written  out  in  full,  but 
evinced  by  the  character  of  the  slip  on  which  the  name  appears." 
And  so  an  indorsement  in  blank  signifies  not  only  that  it  was  the 
payee's  or  subsequent  indorser's  mind  and  wish  that  the  money  call- 
ed for  in  the  instrument  should  be  paid  by  the  maker  or  acceptor  to 
whomsoever  should  lawfully  have  it  in  his  possession,  but  also  that 

title,  and  that  the  holder  by  such  indorsement  could  not  sue  in  his  own  name. 
1  Bing.  N.  C.  151.  See,  also,  in  regard  to  the  effect  of  indorsement  under  the 
French  law,  Lebel  v.  Tucker,  in  which  case  it  was  held  that  where  a  bill  was 
drawn  as  well  as  accepted  in  England  an  indorserrient  in  blank  was  valid. 
L.  R.  3  Q.  B.  77.  The  case  of  Bradlaugh  v.  De  Rin  was  decided  rather  in 
opposition  to  the  principles  laid  down  m  Trimbey  v.  Vignier;  the  court  con- 
sidering that  the  decision  in  that  case  was  made  under  a  mistake  of  fact, 
and  holding  that  there  was  no  evidence  that  the  plaintiff  in  Ti-imbey  v.  Vig- 
nier might  not  have  sued  under  the  French  law.  L.  R.  5  C.  P.  473.  As  to 
the  effect  of  subsequent  indorsements  upon  an  indorsement  in  blank,  see 
Bailey  v.  Armstrong,  4  Wkly.  Notes  Cas.  381 ;   Gould  v.  Mortimer,  Id.  322. 

2  2  Russell  V.  Langstaffe,  2  Doug.  514. 

23  Dean  v.  Hall,  17  Wend.  214. 


Ch.  4]  INDORSEMENT   IN    BLANK.  113 

over  such  indorsement — which  may  be  treated  in  itself  as  a  blank 
general  power — a  subsequent  holder  might  write  an}-  modification 
of  the  instrument  which  was  not  inconsistent  nor  a  material  altera- 
tion of  its  terms.^*  He  may  not  write  over  a  blank  indorsement  a 
waiver  of  demand  and  notice;  -^  or  he  may  not  change  such  an  in- 
dorsement into  a  guaranty.^*'  He  cannot  split  up  the  instrument, 
making  part  of  the  sum  called  for  in  it  payable  to  one  person,  and 
part  payable  to  another.^^  All  these  change  the  terms  of  the  con- 
tract as  they  are  implied  in  law.  But,  if  there  are  successive  in- 
dorsements in  blank,  the  holder  may  fill  up  the  first  to  himself,  op 
he  may  deduce  his  title  through  all,  or  he  may  strike  out  any  or  all, 
or  he  may  turn  the  instrument  over  to  a  stranger  without  indorse- 
ment by  himself;  ^®  for  all  these  instances  in  no  wise  change  the  tem- 

24  Camden  v.  McKoy,  3  Scam.  (111.)  437;  Webster  v.  Cobb,  17  lU.  459;  Hance 
V.  Miller,  21  111.  63G;  Maxwell  v.  Vansant,  46  111.  58;  Boynton  v.  Pierce.  79 
111.  145;  Tenney  v.  Prince,  4  Pick.  (Mass.)  3S5;  Central  Bank  v.  Davis,  19 
Pick.  (Mass.)  373.  But  see  Allen  v.  Coffil,  42  111.  293.  In  Dale  v.  Gear  it  was 
held  that  parol  evidence  was  not  admissible  to  prove  that  an  indorsement  in 
blank  of  a  promissory  note  was  to  be  considered  as  without  recourse  by  a 
special  agreement  between  the  parties,  where  there  was  no  evidence  of  any 
agency  or  equity  as  between  them.    38  Conn.  15. 

25  Central  Bank  v.  Davis,  19  Pick.  (Mass.)  373. 

26  Seabury  v.  Hungerford,  2  Hill  (N.  Y.)  80;  Blatchford  v.  Melliken,  35  HI. 
434;   Seymour  v.  Mickey,  15  Ohio  St.  515. 

27  Erwin  v.  Lynn,  16  Ohio  St.  547;   Lindsay  v.  Price,  33  Tex.  282. 

2  8  Smith  V.  Clarke,  Peake,  225.  In  this  case  a  bill  indorsed  by  payee,  and 
with  subsequent  indorsements,  came  into  the  hands  of  J.  under  a  special  in- 
dorsement. J.  sent  the  bill,  without  indorsement,  to  another  party,  who  dis- 
coimted  the  same  with  plaintiffs,  who  had  struck  out  all  save  the  first  in- 
dorsement. It  was  objected  that  the  instrument  was  affected  by  the  special 
indorsement,  but  it  was  held  that  a  fair  holder  of  a  bill  might  consider  him- 
self the  payer's  indor.see,  and  strike  out  other  indorsemeuts.  For  a  similar 
holding,  see  Mitchell  v.  Fuller,  15  Pa.  St.  208;  josselyn  v.  Ames,  3  Mass. 
274;  Sweetser  v.  French,  13  INIetc.  (INIass.)  262;  Jackson  v.  Haskell,  2  Scanu 
(111.)  565;  Buraap  v.  Cook,  32  111.  168.  As  to  the  liability  of  a  special  indorser, 
see  Johnson  v.  Mitchell,  50  Tex.  212,  Johns.  Cas.  Bills  &  N.  132;  Cole  v.  Cusb- 
ing,  8  Pick.  (Mass.)  48;  Ellsworth  v.  Brewer,  11  Pick.  (Mass.)  316.  In  D,ay  v. 
Lyon  it  was  held  that  although,  by  an  indorsement  in  blank,  the  transferee 
was  authorized  to  fill  in  the  blank,  he  must  do  so  before  submitting  the  note 
in  evidence  in  a  suit  thereon.  6  Har.  &  J.  (Md.)  140;  Walker  v.  Macdonald, 
2  Exch.  527;   Morris  v.  Foreman,  1  DaU.  (Pa.)  193:  Cutting  v.  Conklin,  28  III 

NEG.  BILLS 8 


114  INDORSEMENT.  [Ch.   4 

or  of  the  main  instrumeDt,  or  effect  an  alteration  in  the  letter  or 
the  spirit  of  its  terms.  There  is  no  objection  to  injecting  a  special 
indorsement  upon  an  instrument  payable  to  bearer  or  under  an  in- 
dorsement in  blank.  It  merely  limits  the  person  or  class  of  persons 
to  whom  an  indorser  signifies  that  he  is  willing  to  pay  the  instru- 
ment. Such  an  indorser  says,  in  effect,  "I  will  pay  my  indorsee,  and 
such  person  as  he  directs."  Hence,  to  recover  against  such  an  in- 
dorser, title  through  his  indorsee  must  be  proved  by  proving  his 
indorsee's  signature.  Such  a  contract  is  not  inconsistent  with 
what  may  be  supposed  to  have  been  in  the  mind  of  the  indorser  when 
he  wrote  his  name  on  the  instrument.  The  indorsee  may  treat  any 
indorsement  as  transferring  the  instrument  to  himself,  and  may 
change  it  to  a  form  to  express  this  intention. 

INDORSEMENT  IN  FULL. 

60.  AN  INDORSEMENT  IN  FULL— Means  that  none 
but  the  indorsee  or  the  person  to  whom  the  bill  or  note 
is  ordered  paid  can  demand,  its  payment,  and  that  only 
the  indorsee  in  full  can  transfer  the  instrument  by  adding 
his  own  indorsement. 

61.  An  instrument  w^hich  is  originally  payable  to  bearer, 
or  which  has  been  indorsed  in  blank,  though  afterwards 
indorsed  in  full,  is  still  payable  to  bearer;  except  as  to 
the  special  indorser,  w^ho,  on  such  an  instrument,  after 
such  an  indorsement,  is  only  liable  on  his  indorsement  to 
such  parties  as  make  title  through  it. 

An  indorsement  in  full  is  in  form  commonly  in  this  wise:  If  it 
were  by  John  Smith,  the  payee  in  the  illustration  under  §§  12  and 
13,  it  would  be,  "Pay  to  the  order  of  John  Jones,"  or  "Pay  to 
John  Jones,  or  order,"  or  simply,  "Pay  John  Jones."  While  the  in- 
dorsement in  full,  or  the  special  indorsement  as  it  is  indifferently 
called,  must  name  the  indorsee,  the  indorsement  need  not  neces- 

506;  Morris  v.  Preston,  93  111.  215;  Wooley  v.  Lyon,  117  111.  244,  G  N.  E.  885; 
Savannah  Nat.  Bank  v.  Haskens,  101  Mass.  370;  Watervliet  Bank  v.  White,  1 
Denio  (N.  Y.)  609;  Esty  v.  Snyder,  41  111.  3G3;  Rand  v.  Dovey.  S3  Pa.  St  280; 
Emerson  v.  Curtts,  12  Mass.  78;  Vincent  y.  Horlock,  1  Camp.  442. 


Ch.  4]  ind()Rsemp:nt  in  full.  115 

sarily  be  in  words  negotiable.  It  may  be  either  "Pay  to  John 
Jones,"  or  "Pay  to  the  order  of  John  Jones."  In  either  case  John 
Jones  may  negotiate  the  note  away.  This  is  because  the  original 
instrument  was  negotiable.  It  contemplated  its  passing  from 
hand  to  hand.  Hence,  in  the  illustration,  John  Smith,  the  payee, 
may  direct  that  the  instrument  be  paid  to  John  Jones,  and  John 
Jones,  upon  delivery,  being  the  owner,  may  direct  that  it  be  paid  to 
Thomas  Robinson,  and  the  maker  must  pay  to  Thomas  Robinson, 
or  to  John  Jones,  or  to  John  Smith;  so,  also,  must  John  Jones  pay 
to  Robinson,  because  Robinson  has  a  right  of  action  against  Jones, 
and  Jones  against  Smith;  hence  Robinson  has  aJso  a  right  of  action 
against  Smith.^^ 

When  an  instrument  is  specially  indorsed,  title  can  only  be  trans- 
ferred from  the  indorsee  by  his  indorsement.  In  the  very  outset, 
this  principle  must  be  sharply  contrasted  with  the  case  of  bills  or 
notes  payable  to  bearer  or  indorsed  in  blank.  With  bills  or  notes 
payable  to  bearer  or  indorsed  in  blank,  the  holder  is  presumed  to 
be  the  owner.  Possession  and  title  are  one  and  the  same  thing, 
and  this  though  the  party  possessing  it  is  in  no  wise  a  party 
to  the  instrument.  But  where  the  direction  in  the  contract  is  to 
pay  specially  to  some  person,  that  person  and  no  other  can  direct 
that  the  money  is  to  be  paid  in  its  turn.^"      No  other  person  can 

2  8  Leavitt  v.  Putnam,  3  N.  Y.  (3  Comst.)  494;  Edie  v.  East  India  Co.,  1  W. 
Bl.  295,  2  Burrows,  1216.  In  the  latter  case  it  was  claimed  that  a  special  in- 
dorsement to  A  B,  the  words  "or  order"  being  omitted,  was  equivalent  to  a  re- 
strictive indorsement;  but  it  was  held  that,  since  an  indorsement  to  the  order 
of  A  enables  him  to  maintain  an  action,  an  indorsement  to  A  will,  a  fortiori, 
enable  him  to  indorse.  In  More  v.  Manning  the  holding  was  to  the  same  pur- 
pose. An  assignment  was  made  to  W.,  and  not  to  him  and  order;  and  it  was 
claimed  that  W.  could  not  assign,  for,  by  so  domg,  W.'s  assignor  would  be 
liable  to  suit  by  subsequent  indorsees.  It  was  held  that  the  assignee  of  a  bill 
has  all  the  interest  in  it,  and  may  assign  to  whom  he  pleases,  Comyn,  311; 
Hodges  V.  Adams,  19  Vt.  74. 

3  0  Colson  V.  Arnot,  57  N.  Y.  253;  Mead  v.  Young,  4  Term  R.  28.  In  tlie  case  of 
Mead  v.  Young  a  note  was  drawn  on  defendant,  payable  to  "Henry  Davis  or  or- 
der," but  came  into  possession  of  another  Henry  Davis.  The  bill  was  accepted 
by  defendant,  and  tlie  plaintiff,  being  requested  by  Davis  to  discount  it,  inquired 
of  defendant  if  the  acceptance  was  his.  This  being  affirmed,  the  bill  was  dis- 
counted, the  plaintiff  not  knowing  Davis.  It  was  held,  on  an  action  being 
brougiit,  that  "as  no  person  can  demand  payment  of  a  bill  of  exchange   but 


116  INDORSEMKNT.  [Ch.  4 

personate  this  indorsee,  and  by  forgery  satisfy  the  conditions  of 
this  contract.  And  it  does  not  avail  even  that  the  bill  is  paid  under 
a  forged  indorsement.  Such  payment  or  transfer  was  not  in  con- 
templation of  the  parties  making  the  contract,  and  is  utterly  void.'^ 
In  case  of  the  combination  of  the  two  classes, — indorsements 
in  blank  and  in  full, — the  application  of  the  rules  is  somewhat  con- 
fusing to  the  student.  For  example,  let  us  assume  that  there  are 
indorsed  upon  an  instrument  some  blank  indorsements,  then  some 
special  indorsements,  and  after  these  again  some  indorsements  in 
blank.  The  special  indorser  will  be  liable  only  to  those  "who  can 
make  their  title  through  his  special  indorsement."  The  rule  is  well 
settled  that  if  a  note  or  bill  be  once  indorsed  in  blank,  though  after- 
wards indorsed  in  full,  it  will  still,  as  against  the  drawer,  the  payee, 
and  prior  indorsers,  be  payable  to  bearer,  though,  as  against  the  spe- 
cial indorser  himself,  title  must  be  made  through  his  indorsee.  Sup- 
pose the  following  to  be  a  series  of  indorsements:  (1)  John  Smith. 
(2)  Pay  to  the  order  of  Thomas  Robinson.  Richard  Roe.  (3)  Thomas 
Robinson.  In  such  cases  the  rule  is  laid  down  in  Bank  v.  White.^^ 
In  that  case,  the  suit  was  upon  a  promissory  note,  payable  to  a  W. 
J.  Worth,  and  made  by  White,  the  defendant.  It  was  indorsed  in 
blank  by  Worth  and  by  E.  Olcott,  and  had  upon  it  a  special  indorse- 
ment, in  these  w^ords:  *'Pay  to  E.  Olcott,  or  order.  [Signed]  E. 
C.  Kendrick,  Cashr."  It  was  objected  that  no  formal  transfer  of 
the  note  had  been  shown  from  Olcott  But  the  court  said  that, 
in  suing  the  payee  under  a  blank  indorsement,  this  was  not  neces- 
sary. Worth's  signature  was  sufficient.  Only  in  case  of  suit 
against  Olcott  would  it  have  been  necessary  to  prove  Kendrick's 
signature.     All  the  bank  must  needs  prove  was  the  signature  of 

the  payee,  or  the  person  authorized  by  him,  the  acceptor  only  undertakes  to 
pay  to  them,  and  cannot  be  compelled  to  pay  to  any  other  person,"  and  if  he 
makes  such  payment  it  will  not  discharge  his  debt  to  the  drawer. 

31  Graves  v.  American  Exch.  Bank,  17  N.  Y.  205;  Holt  v.  Ross,  54  N.  Y. 
472;  Chambers  v.  Union  Bank,  78  Pa.  St.  205;  Espy  v.  Bank  of  Cincinnati,  18 
Wall.  004. 

3  2  Waten'liet  Bank  v.  White,  1  Denio,  COS;  Pentz  v.  Winterbottom,  5  Denio, 
51. 


Ch.   4]  INDORSEMENT    WITHOUT    RECOURSE.  117 

ft 

the  pavee  in  blank.  And,  in  the  example  we  are  illustrating,  any 
holder,  to  sue  Richard  Roe,  must  prove  in  addition  to  his  signature 
the  signature  of  Thomas  Robinson,  because  the  indorsement  is  a 
special  order  or  indorsement  to  Thomas  Robinson.^^  But  in  the 
other  cases,  the  indorsement  in  blank  would  presuppose  right  and 
possession,  and  merely  the  signature  of  the  Indorser  sought  to  be 
recovered  against  would  have  to  be  proved. 


INDORSEMENT  WITHOUT  RECOURSE,  CONDITIONAL  AND 
RESTRICTIVE  INDORSEMENT. 

62.  AN   INDORSEMENT   WITHOUT    RECOURSE  — 

Means  that  the  indorser  exempts  himself  from  liability  to 
indemnify  the  holder  upon  the  dishonor  of  the  bill  or  note. 

63.  A  CONDITIONAL  INDORSEMENT  —  Means  an  in- 
dorsement by  -which  the  title  to  the  instrument  does  not 
pass  until  the  condition  mentioned  iii  the  indorsement  is 
fulfilled. 

64.  A  RESTRICTIVE  INDORSEMENT— Means  that  the 
indorsee  is  deputed  by  the  indorser  to  be  his  agent  in  col- 
lecting the  bill  or  note,  or  else  that  the  title  is  vested  in 
the  indorsee  as  a  trustee  or  for  the  use  or  for  the  benefit 
of  a  third  person. 

33  Johnson  v.  Mitchell,  50  Tex.  212;  Smith  v.  Clarlve,  1  Esp.  ISO,  Pealie,  225; 
Walljer  v.  MacDonald,  2  Exch.  527,  17  L.  J.  Exch.  377;  Mitchell  v.  FvUler, 
15  Pa.  St.  268;  Diulman  v.  Earl,  49  Iowa.  37;  Bumap  v.  Cook,  32  111.  IGS; 
Harrop  v.  Fisher,  30  L.  J.  C.  P.  2S3.  In  this  case  a  bill  was  drawn,  payable 
to  the  order  of  the  drawer,  one  Johnson.  The  bill  was  discounted  by  R.,  but 
Johnson  tailed  to  indorse,  and  subsequently  left  the  countiT-  The  acceptor 
refused  to  accept,  on  account  of  the  omission  to  indorse,  and  K.  then  indorsed 
to  the  plaintiff  for  Johnson.  It  was  at  first  decided  that  the  inference  mipht 
be  drawn  that  Johnson  authorized  such  indorsement,  but  on  appeal  it  was 
held  that  evidence  of  authority  was  wanting,  and  tliat  the  law  would  not 
infer  it.  Watervliet  Bank  v.  White,  1  Denio,  G08;  Peulz  v.  Winterbottom,  5 
Denio,  51. 


118  INDOKSEMKNT.  [Ch.   4 

We  have  seen  that,  whether  an  indorser  makes  a  blank  or  a 
special  indorsement  upon  the  instrument,  he  both  incurs  a  liability 
as  an  indorser  thereon,  and  transfers  it.  This  is  true  of  indorse- 
ments generally,  whatever  be  their  form,  provided  the  intention  to 
be  bound  and  to  transfer  be  present.  If  these  can  be  construed 
from  its  form,  it  is  sufficient  to  make  the  writing  an  indorsement. 
For  example,  the  words,  'T  this  day  sold  and  delivered  to  C.  A. 
the  within  note,"'*  were  deemed  an  indorsemenl.  And  any 
form  of  words  consistent  with  the  tenor  of  the  main  instrument, 
and  showing  such  intention,  will  be  treated  by  the  courts  as  creat- 
ing the  contract. 

The  needs  of  commerce  have  created  special  forms  of  indorse- 
ment modifying  and  limiting  the  effect  of  this  contract,  without, 
in  many  instances,  destroying  the  negotiability  of  the  main  instru- 
ment. For  example,  an  indorser  may  exempt  himself  from  lia- 
bility as  an  indorser  by  an  indorsement  without  recourse,  and  yet 
the  instrument  remain  negotiable.  He  may  perhaps,  by  a  con- 
ditional indorsement,  give  all  subsequent  parties  notice  that,  so  far 
as  he  is  concerned,  the  title  to  the  instrument  has  not  vested  in  his 
indorsee  and  subsequent  parties,  and  that  the  instrument  cannot 
be  safely  paid  to  the  holder  until  some  condition  written  upon  it 
is  fulfilled,  or  he  may  restrict  it  in  its  circulation.  The  reason  of 
these  indorsements  is  to  be  kept  carefully  in  mind  while  examining 
them.  They  are  based  upon  the  idea  that  the  right  of  property  in 
the  lawful  owner  implies  the  right,  not  merely  to  sell  it  outright,  but 
also  to  make  such  disposition  of  it  as  he  sees  fit. 

Indorsement  without  Recourse. 

The  indorsement  without  recourse  is  in  form  of  words,  ''Without 
recourse,"  or  "Sans  recourse,"  or  "At  the  indorsee's  own  risk,"  '^ 
or  "I  hereby  indorse  and  transfer  my  right  and  interest  in  this  bill 
to  C  D,  or  order,  but  with  this  express  condition:  that  I  shall  not 
be  liable  to  him  or  to  any  subsequent  holder  for  the  acceptance  or 

34  Adams  v.  Blethen,  66  Me.  19;    Pinnes  v.  Ely.  4  McLean,  173. 

8  0  Rice  v.  Stearns,  3  Mass.  225;  Richardson  v.  Lincoln.  5  Mete.  (Mass.)  201; 
Fitcliburg:  Bank  v.  Greenwood.  2  Allen  (Mass.)  434;  Welch  v.  Lindo,  7 
Cranch,  159;  Mott  v.  Hicks,  1  Cow.  513;  Craft  v.  Fleming,  46  Pa.  St.  140; 
Stevenson  v.  O'Xeiil,  71  111.  314;    Walter  v.  Kirk.  14  111.  55. 


Ch.    4]  CONDITIONAL    INDORSEMENT.  119 

payment  of  the  bill."  ^'  Such  indorsements  throw  no  discredit  on 
the  bill.^^  Such  an  indorser  does  not  escape  from  the  effect  of  the 
warranties,  as  explained  hereafter.^ ^  The  promisee  of  a  negotiable 
bill  or  note  indorses  it  to  a  third  person,  merely  stipulating  that, 
as  the  indorser,  he  is  not  to  be  responsible  if  the  acceptor  or  maker 
does  not  pay  it.  This  he  may  do,  because  he  has  the  property  in 
the  bill  or  note,  and  he  may  dispose  of  it  on  what  terms  he  pleas- 
es. Such  an  indorsement  does  not  render  the  negotiable  security 
no  longer  negotiable.^*  The  bill  or  note  remains  negotiable  in 
the  hands  of  the  indorsee,  although  he  has  no  remedy  against  the 
indorser,  without  recourse.  And,  into  whose  hands  soever  the 
bill  or  note  may  come,  the  maker  is  still  liable  according  to  the 
terms  of  his  original  contract.*"  The  question  with  the  courts 
in  construing  indorsements  without  recourse  is  whether  the  words 
of  the  indorsement  are  such  that  they  clearly  express  an  inten- 
tion on  the  part  of  the  indorser  not  to  be  bound,  and  a  corre- 
sponding intention  on  the  parts  of  the  immediate  subsequent  in- 
dorsees, evidenced  by  their  acceptance  of  the  instrument  with  such 
an  indorsement,  to  exempt  the  indorser  from  his  liability.*^  The 
presumption  is  rather  that  the  usual  liability  of  an  indorser  is  in- 
tended to  be  incurred.  And,  to  overcome  this,  it  must  clearly  ap- 
pear that  the  transfer  of  the  instrument  w^as  only  to  transfer  the 
title  to  it,  and  not  to  indemnify  the  indorsee  against  loss  in  ease 
it  was  not  paid  by  the  acceptor  or  maker. 

Conditional  Indorsement . 

The  conditional  indorsement  is  a  device  by  which  a  payee  or  an 
indorsee  may  part  with  the  possession  of  an  instrument,  but  not 
with  the  legal  title  to  it.  Mr.  Daniel  instances,  "Pay  to  A  B,  or 
order,  if  he  arrives  at  21  years  of  age,"  or  "Pay  to  A  B,  or  order, 
unless  before  payment  I  give  you  notice  to  the  contrary,"  as  exam- 
ples of  conditional  indorsements,  the  former  being  an  indorsement 

86  Chit.  Bills.  235:    also  Pike  y.  Street.  Moody  iS:  M.  226. 

87  Lomax  v.  Pieot,  2  Rand.  (Va.)  260. 

8  8  Frazer  v.  D'Invilliers,  2  Pa.  St.  200;    Hanniim  v.  Richardson.  4S  Vt.  508; 
Dumout  V.  Williamson,  18  Ohio  St.  516;   Challiss  v.  McCrum,  22  Kan.  157. 
89  Russell  v.  Ball,  2  Johns.  50;   Borden  v.  Clerk,  26  Mich.  410. 
4  0  Rice  V.  Stearns,  3  Mass.  225. 
41  Fassm  v.  Hubbard.  55  N.  Y.  465. 


120  INDORSEMENT.  [Ch.  4 

upon  a  condition  precedent,  and  the  latter  one  upon  a  condition 
subsequent.*^  These  conditional  indorsements  have  not  come 
very  often  before  the  courts,  but  they  are  recognized  as  a  distinct 
class.  It  may  be  said,  by  way  of  criticism,  that  in  them  commer- 
cial convenience  has  overridden  the  strict  theory  of  negotiability. 
This  theory  would  not  permit  to  exist  a  condition  which  charged 
every  subsequent  indorsee  with  the  duty  of  seeing  whether  the 
condition  had  been  fulfilled  before  he  could  legally  own  the  instru- 
ment. For,  certainly,  with  the  conditional  indorsement,  as  well  as 
with  the  conditional  bill  or  note,  it  would  be  a  most  effective  restric- 
tion to  circulation  as  a  medium  of  payment.  With  this  criticism  in 
mind,  it  is  well  to  note  the  authority  usually  referred  to  as  the  lead- 
ing case  upon  the  subject, — Robertson  v.  Kensington.*^  There  this 
indorsement  was  made  upon  an  ordinary  draft:  "Pay  the  within 
sum  to  Messrs.  Clark  &  Eoss,  or  order,  upon  my  name  appearing  in 
the  'Gazette'  as  ensign  in  any  regiment  of  the  line  within  two 
months  from  date."  This  was  transferred  to  bona  fide  holders, 
and  the  acceptors  paid  the  bill  on  its  maturity  to  one  of  these.  In 
the  meantime  the  indorser's  name  had  never  appeared  in  the 
Gazette  as  an  ensign,  and  he  brought  suit  as  the  payee  of  the  bill 
against  the  acceptors  who  had  accepted  the  bill  after  this  condition 
had  been  indorsed  upon  it.  And  it  is  to  be  inferred  from  the  report 
of  the  case,  that  the  court  decided  that  such  an  indorsement  was 
only  a  conditional  transfer  of  the  absolute  interest  in  the  bill,  and, 
its  condition  never  having  been  performed,  the  transfer  was 
defeated.  As  appears  from  the  cases,  the  point  emphasized  is  that 
the  condition  operates  as  notice,  and,  being  merely  a  notice,  it 
does  not  destroy  the  negotiability  of  the  bill  or  note.  Thus,  where 
a  note  in  usual  form  had  these  words  upon  it,  signed  by  the  makers, 
"The  within  obligation  is  to  be  delivered  to  the  payees  of  the  note 
as  a  consideration  for  a  judgment  which  was  to  be  assigned  to  the 
makers,"  **  the  court  properly  said  the  words  were  no  part  of  the 
note.  Their  effect  was  only  to  show  the  consideration,  and  to 
operate  as  a  notice  to  any  person  who  might  purchase  the  note. 
By  this  was  meant  that  it  was  the  intention  of  the  parties  that  it 

42  Daniel,  Neg.  Inst.  §  697. 

4  3  Robertson  v.  Kensington.  4  Taunt.  30. 

*4  Sanders  v.  Bacon,  8  Johns.  485;   Tappan  v.  Ely,  15  Wend.  363 


Ch.  4]  CONDITIONAL    INDORSEMENT.  121 

was  not  to  affect  the  original  contract.  And  in  cases  of  conditional 
indorsement,  when  it  is  not  the  intention  of  the  original  parties  that 
the  main  instrument  should  be  contingent,  the  act  of  the  conditional 
indorser  is  not  to  be  understood  as  operating  to  change  the  main 
instrument.  The  terms  of  the  face  of  the  instrument  still  remain  an 
absolute  negotiable  order  or  promise  of  payment  to  some  one.  That 
some  one  might  in  turn  negotiate  the  bill  or  note  to  some  one  else, 
who  in  his  turn  might  continue  his  negotiation  until  it  came  to  the 
conditional  indorser.  But  he,  on  parting  with  it,  having  the  right  of 
property  in  himself,  might  make  a  special  contract  which  would  be 
distinct  from  the  contract  embodied  on  the  face  of  the  instrument. 
And  the  only  purpose  and  result  of  this  contract  would  be  to  notify 
every  holder  subsequent  to  himself,  and  the  maker  or  acceptor, 
when  the  time  for  the  payment  of  the  instrument  arrived,  that  he 
as  an  indorser  parted  with  the  instrument  upon  the  understanding 
that  his  o^Aiiership  of  it  was  not  to  cease  until  some  stated  condi- 
tion was  fulfilled.  As  between  the  immediate  indorser  and 
indorsee,  there  can  be  little  doubt  that  this  is  a  correct  and  proper 
rule.  As  to  them  the  contract  of  indorsement  is  but  an  ordinary 
contract,  open  to  all  objections  and  defenses  to  which  other  con- 
tracts are  open.  Some  of  these  objections  and  defenses  may  even 
be  shown  by  parol  evidence.*^  This  is  because  the  contract  con- 
sists partly  of  the  written  indorsement,  partly  of  the  act  of  delivery 
of  the  bill  to  the  indorsee,  and  partly  of  the  mutual  intention  with 
which  the  delivery  is  made  by  the  indorser  and  received  by  the 
indorsee.*®  But  when  the  question  is  not  one  between  the  im- 
mediate indorser  and  indorsee,  but  between  that  indorser  or 
indorsee  and  third  parties  holding  in  good  faith  and  for  value,  it 
becomes  much  more  embarrassing.  It  is  clear  that  parol  evidence 
or  evidence  of  intention  cannot  be  allowed  to  ingraft  a  condition 

4  5  Bookstaver  v.  Jayne,  60  N.  Y.  146;  Sawyer  v.  Chambers,  44  Barb.  42. 
See  Daniel,  Neg.  Inst.  §§  717,  723,  as  to  classification  of  defenses  wliich  may 
be  sliown  by  parol  evidence.  Benedict  v.  Cowden,  49  N.  Y.  396;  Hartley  v. 
Wilkinson,  4  Maule  &  S.  25;  Cholmeley  v.  Darley,  14  Mees.  &  W.  343;  Leeds 
V.  Lancashire,  2  Camp.  205. 

*8  Bruce  v.  Wright,  3  Hun,  548;  Benton  v.  Martin,  52  N.  Y.  570;  Prentiss 
V.  Graves,  33  Barb.  021;    Ocean  Bank  v.  Dill,  39  Barb.  577. 


122  INDORSEMENT.  [Ch-   4 

upon  the  instrument  such  that  it  will  affect  third  parties.*^  But 
where  the  indorsement  is  in  writing,  the  rule  is  so  far  settled  that 
the  maker  or  acceptor  and  probably  prior  parties  are  bound  to  take 
notice  of  the  title  of  the  indorsee,  and  having  such  notice,  they  pay 
the  instrument  to  him  or  to  subsequent  parties  at  the  risk  of  repay- 
ment to  the  conditional  indorser,  if  the  condition  is  unfulfilled.*" 
But,  on  the  other  hand,  the  conditional  indorser  cannot  restrict  the 
negotiability  of  the  instrument  and  prevent  its  further  indorsement 
by  his  indorsee.*®  The  terms  of  the  original  instrument  making 
it  negotiable  prevail,  and  persons  other  than  the  conditional  in- 
dorsee may  take  it  subject  to  the  notice  of  the  condition.  And 
though  there  is  little,  if  any,  authority  upon  the  point,  still  it  may 
be  assumed  that  in  the  absence  of  an  express  warranty  no  other  than 
a  conditional  warranty  of  title  in  the  subsequent  indorser  would  be 
implied."*"  There  seems  to  be  no  reason  why  the  other  implied 
warranties  should  not  remain  a  part  of  the  contract.  But  the 
notice  of  a  conditional  title  with  which  the  subsequent  purchaser 
of  the  instrument  would  be  charged  would  seem  to  expressly  except 
warranty  of  title  from  the  obligations  of  the  indorser. 
Restrictive  Indorsement. 

The  last  of  these  peculiar  classes  of  indorsements  originating 
in  the  needs  of  commerce  is  the  restrictive  indorsement.  It  is  of 
two  kinds.  The  first  and  commonest  variety,  and  the  one  which 
is  generally  spoken  of  by  the  text  writers  as  the  restrictive  indorse- 
ment, is  that  where  the  holder  deputes  to  some  other  person  the 
business  of  collecting  the  bill ;  the  other  where  the  holder  indorses 
the  instrument  to  one  person  for  the  use  or  benefit  of,  or  as  the  trustee 
of,  another.  Upon  an  indorsement  of  the  first  kind  the  instrument 
is  no  longer  negotiable;  the  second  variety  of  indorsement  does  not, 
however,  restrict  its  circulation.  Examples  of  the  first  species  of 
indorsement  are  indorsements  "For  deposit"  "  or  indorsements  "For 

*^  Byles,  Bills,  p.  155;    Willse  v.  Whitnker,  22  Hiin.  242. 

48  Robertson  v.  Kensington,  4  Taunt.  30;    Savage  v.  Aldien,  2  Starkie,  232. 

49  Soares  v.  Glyn,  8  Q.  B.  24;   s.  e.  14  L.  .T.  Q.  B.  313. 
BO  Mandeville  v.  Newton.  11<J  N.   Y.  10,  23  N.   E.   *J20. 
Bi  Johnson  v.  Donnell,  00  N.   Y.  1. 


Ch.    4]  RESTRICTIVE    INDORSEMENT.  125 

collection,"  "^  the  indorsement  for  deposit  implying  no  authority  even 
to  receive  payment  of  the  bill  or  note,  and  that  for  collection  mean- 
ing that  the  holder  takes  no  title  to  it  and  can  transfer  none,  but 
can  merely  present  it  and  receive  the  money  upon  it."  In  constru- 
ing these  and  other  cases  like  them,  such  as  "Pay  to  A  or  order  for 
account  of  B,"  ^*  or  "Pay  to  A  for  my  use,"  ^^  or  "Pay  to  A  for 
me,"  ^°  or  "Pay  to  my  steward  and  no  other  person,"  or  "Pay  to  my 
servant  for  my  use,"  "^  the  courts  have  been  governed  by  two 
principles.  The  first  and  most  important  is  the  reason  that  the 
natural  construction  of  such  a  form  of  words  is  that  it  implies  a 
mere  authority  to  receive  the  money  called  for  in  the  instrument  for 
the  use  of  the  indorser  himself,  or  according  to  his  directions.  It 
therefore  vests  a  mere  agency  in  the  indorsee  and  shows  that  he, 
at  least,  did  not  give  a  valuable  consideration  for  the  bill  or  note 
and  is  not  therefore  its  absolute  owner.  It  follows  from  this  that 
the  restrictive  indorser,  in  creating  such  an  agency,  did  not  intend 
to  pass  the  title  to  the  indorsee,  but  rather  to  retain  it  in  himself. 
And  hence,  there  being  no  intention  to  transfer,  the  instrument  can- 
not be  negotiated  through  the  indorsement.^®  The  second  is  the 
reason  that  the  restrictive  indorsement,  like  the  conditional  in- 
dorsement, operates  as  notice  both  to  the  persons  called  upon  to 
pay  the  instrument  and  those  who  might  acquire  it  after  the  indorse- 
ment as  purchasers.  No  subsequent  purchaser  could  take  the  in- 
strument in  good  faith,  because  whoever  reads  the  indorsement,  as 
it  would  be  every  purchaser's  legal  duty  to  read  it,  must  see  that  its 
operation  was  limited.      Such  a  purchaser  must  see  that  the  object 

B2  National  City  Bank  of  Brooklyn  v.  Westcott,  118  N.  Y.  468.  23  N.  E.  900. 

6  3  Sigouruey  v.  Lloyd.  8  Barn.  &  C.  622;  White  v.  Miners'  Nat.  Bank,  102 
U.   S.  658. 

64  In  Trenttel  v.  Barandon,  the  defendants  took  from  the  agent  of  tlie 
plaintiffs  a  bill  thus  indorsed,  "Pay  to  J.  P.  De  Roure,  or  order,  for  account 
of  Messrs.  Trenttel  &  Wurtz,"  and  received  it  expressly  by  way  of  security. 
arid  not  of  deposit.  It  was  held  that  the  defendants  had  sutticient  notice 
that  such  bill  was  not  the  property  of  De  Roure,  the  plaintiffs'  agent.  8 
Taunt.  100. 

6  5  Lloyd  V.  Sigonrney,  5  Bing.  525. 

6  6  Williams  v.  Potter,  72  Ind.  354. 

67  Edie  V.  East  India  Co.,  2  Burrows,  1221. 

6  8  Hook  V.  Pratt.  78  N.  Y.  371. 


124  INDORSEMENT.  [Ch.  4 

of  the  indorser  was  to  prevent  the  money  received  from  being  applied 
to  the  use  of  any  other  person  than  himself.  And  therefore,  to 
whomsoever  the  money  might  be  paid,  it  would  be  paid  in  trust  for 
the  indorser,  and  wheresoever  the  instrument  traveled  it  carried 
that  trust  on  the  face  of  it.^®  But  there  is  a  class  of  so-called 
restrictive  indorsements  which  has  a  very  different  construction  at 
the  hands  of  the  courts.  The  words  in  which  these  indorsements 
are  framed  are  such  as  "Pay  to  A  or  order  for  the  use  of  B,"  ''°  and 
"Pay  to  the  order  of  A  for  the  benefit  of  B."  "^  The  meaning  of 
these  words  is  declared  to  be  that  on  making  such  an  indorsement 
the  indorser  intended  to  part  with  his  whole  title  to  the  instru- 
ment. At  least  there  is  nothing  in  the  words  themselves  to  nega- 
tive such  a  presumption.  And  it  perhaps  is  the  case,  though  it  is 
not  so  expressly  stated,  that,  unless  there  was  some  expression 
negativing  this  idea,  the  words  "or  order,"  taken  with  the  fact 
of  the  indorsement  itself,  would  be  an  evidence  of  intendment  to 
part  with  the  title.  However  this  may  be,  the  courts  have  declar- 
ed the  meaning  of  the  words  "for  the  use"  and  "for  the  benefit"  to 
mean  that  the  indorser  vested  the  indorsee  with  the  title  of  the  bill 
not  for  the  benefit  of  the  indorser,  but  for  the  benefit  of  some  one 
else.  So  that  the  indorsee  was  a  trustee  for  that  other  person, 
and  could  not  pass  off  the  bill  for  his  own  debt.  For  this  reason 
the  indorsement  must  be  presumed  to  have  been  made  upon  a  con- 
sideration. And  being  thus  a  transfer,  with  its  operation  limited 
to  the  right  of  the  indorsee  to  apply  its  proceeds  to  the  benefit  of  some 
person  other  than  himself,  the  instrument  could  in  turn  b^  trans- 
ferred, and  so  the  paper  continued  negotiable.  And  because  it  was 
negotiable  it  was  a  pledge  of  the  credit  of  the  restrictive  indorser. 
Although  these  reasons  cannot  be  given  upon  the  weight  of  au- 
thority, still  they  are  probably  sound  ones.     It  is  settled  that  an 

59  Lloyd  V.  Sigourney,  5  Bing.  525.  In  this  case  the  indorseinGnt  was  to 
this  effect:  "Pay  to  S.  W.,  or  order,  for  my  use.  Henry  Sigourney."  It 
was  held  that  such  indorsement  was  restrictive,  and  was  sufficient  to  put  a 
purchaser  of  such  bill  upon  inquiry,  since  it  indicates  that  the  holder  is 
simply  acting  as  the  agent  for  the  one  for  whose  use  be  is  holding.  Treuttel 
V.  Barandon,  8  Taunt.  100;   Ancber  v.  Bank  of  England,  2  Doug.  637. 

80  Evans  v.  Cramlington,  Carth.  5,  affirmed,  in  the  exchequer  chamber.  2 
Vent.  309. 

61  Hook  V.  Pratt,  78  N.  l:.  371. 


Ch.   4]  NATURE    OF    INDORSEMENT.  125 

indorsement  "Pay  to  A"  does  not  restrict  the  negotiation  of  the 
instrument,  because  the  intention  of  the  original  parties  to  make 
the  instrument  negotiable  prevails  over  the  absence  of  words  of 
negotiability  in  the  indorsement.®^  And  for  the  same  reason,  with 
these  forms  of  words  the  instrument  should  continue  negotiable 
unless  it  expressly  appears  from  the  contract  between  the  indorser 
and  indorsee  that  the  indorser  intended  to  absolve  himself  from 
liability  as  an  indorser  and  to  destroy  the  effect  of  the  general  rule 
that  the  indorsee,  having  possession  of  the  instrument,  was  its  owner. 
And  lastly  it  must  be  admitted  that,  while  these  seem  the  sound  and 
true  views  of  the  case,  they  are  not  the  doctrines  commonly  found 
in  the  text-books,  and  the  student  in  fixing  them  in  his  mind  must 
observe  that  the  weight  of  authority  is  to  the  contrary.®* 

NATURE  OF  INDORSEMENT. 

65.  The  nature  of  an  indorsement  is  as  follo-ws.     It  is: 

(a)  A  contract  which   the   indorser  assumes   -with 

his  indorsee  and  subsequent  holders  that,  if 
the  dra-wee,  acceptor,  or  maker  fails  to  honor 
the  bill  or  note,  he  "will,  upon  the  perform- 
ance of  certain  conditions  imposed  by  the 
la'wr  merchant,  indemnify  the  holder  for  all 
loss  incurred  by  rep.son  of  the  dishonor  of 
the  bill  or  note. 

(b)  A  transfer  of  the  title  to  the  instrument." 

Perhaps  the  most  important  aspect  of  the  indorsement  is  that 
it  is  a  distinct  contract  It  gives  it  all  the  effect  of  a  new  instru- 
ment as  against  the  indorser,  though  it  does  not  in  fact  create  a 
new  instrument.  Every  indorser  of  a  bill  is  a  new  drawer,  and  it  is  a 
part  of  the  inherent  property  of  the  original  instrument  that  an  in- 

62  Edie  V.  East  India  Co.,  1  W.  Bl,  295,  2  Burrows,  121G;  More  t.  Mfinuing, 
Comyn.  311;    Leavitt  v.  Putnam.  3  N.  Y.  494. 

63  Daniel,  Neg.  Inst.  §§  698,  G99;  Edw.  Bills  &  N.  §  395;  Tied.  Com.  Paper, 
§  208;   Rand.  Com.  Paper,  §§  724-727.     See,  contra,  2  Ames,  Bills  &  N.  p.  837. 

64  2  Ames.  Bills  &  N.  p.  837. 


1f?6  INDORSEMENT.  [Ch.  4 

dorsement  operates  as  against  the  indorser  in  the  nature  of  a  new 
drawing  of  the  bill  by  him.*"^  The  first  legal  fact  of  the  theory  with 
which  the  student  should  familiarize  himself  is  that,  from  the  form 
of  words  which  we  have  already  given  as  common  methods  of  in- 
dorsement, the  courts  have  created  a  peculiar  class  of  rights  and 
liabilities.  The  main  terms  of  the  contract  are  found  on  the  face  of 
the  bill  or  note.  In  the  illustrations  under  §§  12  and  13,  for 
example,  the  main  terms  were  an  order  or  promise  to  pay  at  a 
given  time  and  place  a  certain  sum  of  money,  either  to  some  speci- 
fied person  or  to  such  person  as  he  might  direct.  The  indorser  in 
his  contract  adopts  and  ratifies  each  of  these  terms,  and  makes  them 
the  main  terms  of  his  own  contract.  This  idea  will  perhaps  \>e 
made  more  clear  by  saying  that  if,  in  the  illustration  under  §  13, 
John  Smith  had  indorsed  the  note:  "Pay  to  John  Jones.  [Signed] 
John  Smith," — John  Jones  could  negotiate  it  further,  despite  the 
indorsement  was  not  in  the  negotiable  form  of  "Pay  to  Jones,  or 
order."  This  is  because,  by  the  terms  on  the  face  of  the  instru- 
ment, the  maker,  Thomas  Robinson,  had  promised  to  pay  "to  order." 
This  means  that  he  had  put  into  circulation  a  promise  to  pay  money 
not  only  to  John  Smith,  but  to  any  one  who  might  legally  hold  the 
instrument.  And,  except  in  case  of  John  Smith's  making  a  restrict- 
ive indorsement  to  an  agent  without  intention  on  his  part  to  trans- 
fer title,  the  indorsement  of  John  Smith  would  be  construed  only 
as  an  adoption  of  the  promise  of  Thomas  Robinson,  which  was  tliat 
the  note  might  pass  from  hand  to  hand  ad  infinitum,  until  Robinson 
paid  it.®' 

But  there  is  more  embodied  in  the  contract  of  the  indorser  than 
the  terms  which  are  found  in  the  face  of  the  instrument.  And  these 
are  the  terms  which  are  implied  in  and  made  a  part  of  the  contract 
by  the  law.  As  we  have  seen,  a  part  of  the  contract  of  the  in- 
dorser is  that  it  is  a  contract  of  indemnity."^  The  right  to  this  in- 
demnity accrues   only   upon  the  fulfillment   of   certain   conditions 

6  5  Penny  v.  Innes,  1  Cromp.  M.  &  R.  439;  McCamant  v.  Miners'  Tru5?t  Co. 
Bank,  15  Wkly.  Notes  Cas.  (Pa.)   122. 

86Leavitt  v.  Putnam.  3  N.  Y.  (3  Comst.)  494;  Edie  v.  East  India  Co..  1 
W.  Bl.  295,  2  Burrows.  1216. 

«7  Byles,  Bills,  p.  154;   Edw.  Neg.  Inst.  §  384;    Story,  Prom.  Notes,  §  135. 


Ch.   4]  NATURE    OF    INDORSEMENT.  127 

which  are  conditions  precedent  to  its  enforcement."  It  is  not,  like 
the  guaranty  of  payment,  for  instance,  payable  absolutely,  primarily, 
and  forthwith.  The  indorser  is  in  law  a  new  drawer  of  the  bill  and 
a  new  maker  of  the  uote.*^"  In  either  instance  with  reference  to 
his  indorsee  he  stands  precisely  in  the  position  of  the  drawer  of  the 
bill  or  the  maker  of  the  note.  If  the  instrument  be  a  bill  he  may 
be  supposed  to  have  assets  in  the  hands  of  the  drawee  and  to  give 
the  indorsee  an  order  for  the  payment  of  them.  In  the  case  of  a  note 
the  considerations  existing  between  the  payee  and  the  maker  may  be 
supposed  to  exist  between  him  and  his  indorsee.  Cut  he  does  not 
make  any  contract  affecting  the  liability  of  his  general  funds  until 
the  considerations  existing  between  the  original  parties  have  failed. 
By  this  is  to  be  understood  that  by  the  mere  non-payment  of  the 
instrument  in  the  first  instance  the  indorser  breaks  no  contract,  be- 
cause his  contract  is  separate  and  apart  from  that  of  the  original 
parties.^"  The  contract  which  the  law  puts  into  his  mouth  when 
he  writes  his  name  on  the  back  of  the  instrument  is  payment  on  his 

88  Musson  V.  Lake,  4  How.  (U.  S.)  262;.  Cuyler  v.  Stevens,  4  Wend.  56G; 
Cayuga  Co.  Bank  v.  Warden.  1  N.  Y.  413. 

«9  Aymar  V.  Sheldon,  12  Wend.  439.  In  this  case  the  following  was  held:  No 
principle  seems  more  fully  settled  or  better  understood  in  commercial  law,  than 
that  the  contract  of  the  indorser  is  a  new  and  independent  contract,  and  that 
the  extent  of  his  obligations  is  determined  by  it.  The  transfer  by  indorsement 
is  equivalent  ih  effect  to  the  drawing  of  the  bill.  In  Gwinnell  v.  Herbert  a  dis- 
tinction is  drawn  between  a  bill  and  a  note,  to  the  effect  that  on  a  bill  each 
indorser  is  a  new  drawer,  but  the  drawer  is  liable  only  on  default  of  the  ac- 
ceptor, while  the  maker  of  a  note  is  liable  in  the  first  instance.  So,  if  each 
indorser  became  a  maker,  he  also  would  be  liable  primarily.  5  Add.  &  E. 
436.  Holbrook  v.  Vibbard,  2  Scam.  (III.)  4(;r>;  Belford  v.  Bangs,  15  111. 
App.  76. 

7  0  In  Rothschild  v.  Currie,  it  was  held  that  the  indorser  contracts  to  pay 
not  primarily  or  absolutely,  but  on  two  conditions:  dishonor  by  drawee  or 
acceptor;  and  due  notification  to  himself  of  such  dishonor.  Being  in  law  a 
new  drawer  of  the  bill,  the  same  state  of  things  is  supposed  to  exist  between 
him  and  the  indorsee,  as  the  law  supposes  between  the  drawer  and  payee. 
1  Q.  B.  43.  In  "Matthews  v.  Bloxsome,  33  Law  J.  209,  the  defendant  intending 
to  become  surety  for  A,  put  his  name  at  the  back  of  a  blank  bill  stamp.  The 
bill  was  then  filled  up  by  plaintiffs  as  drawers,  payable  to  their  own  order. 
As  he  gave  authority  to  fill  out  the  bill,  the  defendant  was  in  the  same  position 
as  an  indorser  after  the  bill  had  been  drawn,  and  might  be  treated  as  a  new 
■drawer.    33  Law  J.  Q.  B.  209. 


128  INDORSEMENT.  [Ch.  4 

part  according  to  the  terms  of  the  original  instrument,  with  the 
added  conditions  of  due  presentment,  dishonor,  and  notice  of  dis- 
honor. His  contract  therefore  is  that  his  general  funds  are  liable 
according  to  the  original  terms  of  the  instrument  and  indemnity 
for  their  breach,  provided  there  have  been  due  and  proper  present- 
ment, dishonor,  and  notice  of  dishonor  by  the  holder.^^ 
As  a  Transfer. 

The  last  general  element  of  an  indorsement  is  that  it  is  a  transfer 
of  the  title  to  the  instrument.  It  is  sufficient  here  to  say,  in  gen- 
eral terms,  that  by  this  is  meant  nothing  more  than  that  it  is  a  mere 
purchase  and  sale  of  a  piece  of  property.  The  indorser  or  transfer- 
er is  viewed  in  many  respects  as  a  vendor,  and  the  indorsee  or 
transferee  as  a  vendee.  It  is,  of  course,  not  tangible  property,  but 
a  chose  in  action,  and  as  such  transferee  or  vendee  the  indorsee 
merely  purchases  the  rights  of  the  indorser.  What  these  are,  and 
the  legal  relation  of  the  indorsee  to  the  various  parties  to  the  instru- 
ment, will  be  considered  hereafter. 

REQUISITES  OF  INDORSEMENT. 

66.  The  requisites  of  an  indorsement  are  as  follows: 

(a)  It  must  follow  the  tenor  of  the  bill  or  note. 

(b)  It  must  be  by  the  payee  or  a  subsequent  holder. 

(c)  It  is  only  complete  upon  delivery. 

Following  Tenor  of  Instrument. 

The  tenor  of  a  bill  or  note  has  already  been  explained,  under  § 
43.  The  same  reasons  require  that  the  indorsement  follow  the 
tenor  of  the  original  instrument  that  require  that  the  acceptance 
follow  it.  The  indorser  as  well  as  the  acceptor,  may  not  alter  the 
amount  of  money  ^*  obligated  in  the  instrument  to  be  paid,  nor  the 

71  Mt.  xAIansfield  Hotel  Co.  v.  Bailey,  64  Vt.  151,  24  Atl.  130;  Id.,  Johns.  Cas. 
Bills  &  N.  109;  May  v.  Coffin,  4  Mass.  341;  Warder  v.  Tucker,  7  Mass.  449; 
Bryant  v.  Faries,  1.5  111.  App.  414. 

7  2  Hawkins  v.  Cardy,  1  Ld.  Raym.  360.  In  this  case  it  was  shown  that 
Cardy  drew  a  bill  for  £46.  19s.,  payable  to  B  or  order,  and  that  B  indorsed 
£43.  4s.  of  it  payable  to  plaintiff.  It  was  held  by  the  court  that  the  note  was 
such  a  personal  contract  as  not  to  be  capable  of  apportionment.  Planters' 
Bank  of  Tennessee  v.  Evans,  3G  Tex.  592. 


Ch.   4]  REQUISITES    OF    INDORSEMENT.  129 

time/'  place,  nor  manner  of  payment.  If,  for  instance,  the  in- 
dorser  promised  to  pay  part  of  the  sum  called  for  in  the  originnl 
instrument  to  one  person,  and  part  to  another,  it  would  amount  to 
an  apportionment  of  the  contract,  and  the  acceptor  or  maker  would 
thus,  by  the  indorser's  act,  be  liable  to  two  actions  where,  by  the 
terms  of  the  original  contract,  he  was  liable  to  but  one.''*  Were 
the  rule  otherwise,  the  indorser  would  be  empowered  to  make  a 
contract  for  the  maker  or  acceptor  without  his  assent, — a  reductio 
ad  absurdum.  But  this  does  not  mean  that,  when  an  instrument 
has  been  paid  in  part,  a  receipt  for  the  amount  paid  may  not  be 
written  on  its  back,  and  the  indorser  may  not  transfer  the  balance,'" 
nor  that  a  note  may  not  be  transferred  to  two  or  more  persons, 
who  hold  it  in  co-ownership  as  a  joint  right,'®  nor  that  an  instrument 
may  not  be  indorsed  to  a  third  person  as  collateral  security  for  a 
claim  equaling  but  part  of  the  amount  called  for  in  the  instrument 
itself.'^'  All  these  are  perfectly  proper  courses,  because  they 
transfer  but  one  right  of  action.  The  test  is,  does  the  transfer  cut 
up  the  right  of  action,  or  vary  it,  or  invest  different  persons  with 
different  rights  of  action  against  different  parties  to  the  instrument 
If  it  does,  the  indorsement  is  void  as  such. 

It  is  sometimes  argued  that  a  writing  on  the  back  of  the  instru- 
ment, in  the  form  of  words  of  a  guaranty,  corresponds  to  and  fol- 
lows the  tenor  and  purpose  of  the  instrument,  and  that  for  this 
reason  it  is  a  form  of  indorsement.  But  the  better  opinion  is  that 
its  legal  effect  is  what  it  purports  to  be, — a  form  of  a  special  con- 
tract. A  guaranty  in  general  terms,  such  as  "I  warrant  the  col- 
lection of  the  within  note,  for  value  received,"  does  not  authorize 
a  suit  against  guarantor  by  a  subsequent  holder  of  the  note.  This 
is  not  an  indorsement.     It  is  not  even  transferable  with  the  instru- 

78  In  Smallwood  v.  Vernon,  1  Strange,  478,  It  was  held  that  an  Indorser 
might  charge  himself  to  pay  at  a  different  time  from  that  specified  In  the 
note,  though  he  could  not  lay  a  charge  upon  the  maker  of  a  note,  differing 
from  the  terms  of  such  note.  If  a  note  were  payable  May  1st  and  It  was 
Indorsed  payable  April  1st,  this  would  make  it  a  promissory  note  payable, 
as  to  the  Indorser,  April  1st. 

T4  Douglass  V.  Wilkeson.  6  Wend.  637. 

TBid. 

76  Flint  V.  Flint.  6  Allen,  36;    Conover  v.  Earl,  26  Iowa,  167. 
ti  Reid  v.  Furuival,  5  Car.  &  P.  4yy. 

N  EG.  BILLS 9 


130  INDORSEMENT.  [Ch.   4 

ment  itself.  It  is  a  special  contract,  which  can  be  enforced  only 
in  the  name  of  and  by  the  person  with  whom  the  contract  was 
made.  The  fact  of  the  guaranty  being  in  terms  negotialble  does  not 
change  its  character.''^  For  where  the  guaranty  was  in  fonn,  "J 
sell,  assign,  and  guarantee  the  payment  of  the  within  note  to  John 
Allen,  or  bearer,"  and  the  instrument  upon  which  this  guaranty  was 
written  was  itself  negotiable,  then,  so  far  as  the  guarantor  is  con- 
cerned, the  words  were  still  construed  as  a  guaranty  not  within  the 
privileges  of  negotiability.  In  such  case  the  debtor  must  seek  the 
creditor.  As  regards  the  maker  of  the  note,  and  to  render  him 
liable,  no  demand  is  necessary,  and  the  guarantor  is  entitled  to  no 
notice  of  the  failure  of  the  maker  or  acceptor  to  pay  the  instru- 
ment.''® But,  although  such  a  guarantor  lacks  these  privileges,  his 
guaranty  still  passes  with  the  instrument,  and  vests  whomsoever 
may  hold  the  note  with  right  to  sue  upon  it.^°  It  amounts,  in  fact, 
to  an  indorsement  with  a  waiver  of  these  privileges  we  have  speci- 
fied; yet  the  student  must  be  careful  in  these  respects  to  remember 
that  it  is  not  an  indorsement.  Though  this  proposition  is  subject 
to  much  confusion,  arising  from  the  position  taken  by  the  courts 
of  some  jurisdictions  that  written  words  in  form  of  a  guaranty  may 
be  treated  as  an  indorsement,  if  it  can  be  shown  by  extrinsic  evi- 
dence that  such  was  the  intention  of  the  parties,  it  is  a  doctrine 
wiser  and  more  consistent  with  the  theory  of  negotiability,  and 
more  for  the  benefit  of  subsequent  indorsers,  that  a  written  con- 
tract of  one  kind  should  not  be  turned  into  a  contract  of  a  different 
kind  by  parol  proof  concerning  the  intention  of  the  parties;  and 
the  indorser  of  an  instrument  should  not,  under  certain  circumstan- 
ces, be  charged  sometimes  as  an  indorser  and  sometimes  as  a  guar- 
ds Lamourieux  v.  Hewit,  5  Wend.  3UT;  McDoal  v.  Yeomans,  8  Watts,  3G1; 
Belcher  v.  Smith.  7  Cush.  482;  Trust  Co.  v.  National  Bank,  101  U.  S.  68. 
See,  contra,  Judson  v,  Gookwin,  37  111.  286;  Partridge  v.  Davis,  20  Vt  499; 
Barrett  v.  May,  2  Bailey,   1:   McLaren  v.  Watson's  Ex'rs.  26  Wend.  425. 

7  8  Vyse  v.  Wakefield,  6  Mees.  &  W.  442;  Walton  v.  Mascall,  13  Mees.  S: 
W.  72. 

80  Allen  V.  Rightmere,  20  Johns.  364;  Ketchell  v.  Burns,  24  Wend.  456; 
Prosser  v.  Luqueer,  4  Hill,  420;  Hough  v.  Gray,  19  Wend.  202.  For  further 
authorities  upon  guaranty,  see  Bissell  v.  Gowdy,  31  Conn.  47;  Springer  v. 
Hutchinson,  19  Me.  359;  Taylor  v.  Biuuey,  7  Mass.  479;  Partridge  v.  Davis, 
supra. 


Ch.  4]  REQUISITES    OF    INDORSEMENT.  131 

antor.     Such  principles  are  subversive  of  the  certainty  necessary  for 
circulating  mediums.* 

Who  may  Indorse. 

The  requisite  of  an  indorsement  next  ^n  importance  to  its  being 
according  to  the  tenor  of  the  instrument  is  that  it  be  by  the  payee  or 
a  subsequent  holder.  The  sense  of  this  rule  is,  however,  restricted. 
As  we  shall  see  in  the  next  section,  it  is  limited  in  its  application 
to  insti'uments  payable  to  order.  It  is  also  limited  in  that  a  person 
who  is  not  a  holder  or  owner  of  the  instrument  in  any  sense,  but 
who  puts  his  name  upon  it  merely  to  support  its  circulation  by  his 
credit,  may  be  an  indorser.^^  All  that  we  would  here  say  is  that  in 
case  of  instruments  payable  to  order  the  payee  must  be  in  the  first 
instance  the  first  indorser.^^  This  is  because  of  several  reasons. 
The  first  is  that  the  property  of  the  instrument  is  in  the  payee. 
Until  he  indorses  it,  the  legal  title  is  not  transferred.*'  Mere  pos- 
session by  some  one  else  of  the  instrument  unindorsed  does  not 
entitle  that  other  person  to  the  full  rights  of  a  bona  fide  purchaser, 
and  if  the  maker  or  acceptor  pays  it  to  such  person,  it  is  at  the 
risk  of  possible  re-payment.^*  But  this  rule  is  not  universal  in 
its  application.      An  indorsement  is  only  necessary  to  transfer  the 

*  Spies  V.  Gilmore,  1  N.  Y.  321. 

81  An  infant  who  is  bolder  or  payee  of  a  note  or  bill  may  transfer  it  by 
indorsement.  Hardy  v.  Waters,  38  Me.  450,  Johns.  Cas.  Bills  &  N.  152; 
Spencer  v.  Allerton,  60  Conn.  410,  22  Atl.  778;  Id.,  Johns.  Cas.  Bills  &  N.  120; 
Bank  of  Jamaica  v.  Jefferson.  92  Tenu.  537,  22  S.  W.  211;  Id.,  Johns.  Cas. 
Bills  &  N.  126.  As  holding  that  an  indorsement  by  another  than  the  payee 
partakes  rather  of  the  nature  of  a  guaranty,  see  Boynton  v.  Pierce,  79  III. 
145;  Cushman  v.  Dement,  3  Scam.  (111.)  497;  Croskey  v.  Skinner,  44  111.  321; 
Smith  V.  Finch.  2  Scam.  (111.)  321. 

s^Cock  V.  Fellows,  1  Johns.  143;  Prevot  v.  Abbott,  5  Taunt,  786.  In  this 
case  the  plaintifE  averred  delivery  to  him  by  the  defendant,  and  also  the  facts 
of  acceptance,  presentment  for  payment,  and  dishonor.  Judgment  for  plain- 
tiff was  arrested  after  verdict  for  the  reason  that  indorsement  by  the  defend- 
ant had  not  been  averred.  Pease  v.  Hirst,  10  Barn.  &  C.  122;  Freeman  v. 
Perry,  22  Conn.  617;  Newman  v.  Ravenseroft.  67  111.  496;  Woodbury  v.  Wood- 
bury, 47  N.  H.  11;  Lewis  v.  Hathman.  7  Ind.  585;  Titcomb  v.  Thomas,  5 
Greeul.  282;   Pease  v.  Dwight,  6  How.  (U.  S.)  190. 

8  3  Ellis  V.  Brown.  6  Barb.  282. 

84  Doubleday  v.  Kress.  50  N.   Y.  410. 


132  INDORSEMENT.  [Ch.   4 

lejxal  as  distinguished  from  the  equitable  title  to  the  paper.  If  by 
mistake,  accident,  or  fraud,  the  indorsement  has  been  omitted,  when 
it  was  intended  that  the  indorsement  should  be  made,  the  payee  may 
be  compelled  by  a  court  of  equity  to  make  the  indorsement  Mean- 
time the  transferee  holds  the  bill  or  note  under  the  same  rights  that 
he  would  have  acquired  under  the  assignment  of  paper  not  negotia- 
ble. In  other  words,  he  is  the  beneficial  owner,  and  has  those 
rights  and  only  those  rights  against  prior  parties  which  the  payee 
or  his  assignor  might  have, — and  every  equitable  defense  available 
against  them  is  available  against  him.^'  This  rule  applies  to  sub- 
sequent holders  of  instruments  through  unindorsed  indorsements 
in  full,  both  in  relation  to  the  transfer  of  title  and  to  laying  the 
instrument  open  to  equitable  defenses.  In  cases  of  indorsements 
in  full,  the  indorsee  in  such  indorsement  named  must  for  th& 
same  reasons  himself  indorse  the  instrument.  In  no  other  way 
will  the  transfer  convey  the  legal  title  to  the  holder,  so  that  he  can 
at  law  hold  the  otter  parties  liable  to  him.  The  second  reason 
rests  upon  the  theory  that  the  liability  of  indorsers  to  each  other 
is  regulated  by  the  position  of  their  names.  This  reason  also  is 
restricted  in  its  application.  To  this  rule,  too,  the  accommodation 
indorser,  who  has  not  owned  the  paper,  and  to  whom  no  such  trans- 
fer has  been  made,  is  also  an  exception.^'  Although,  of  course, 
where  the  second  accommodation  indorser  of  an  instrument  has 
paid  and  talcen  it  up,  he  becomes  a  holder  for  value,  and  may  com- 
pel the  first  accommodation  indorser  to  pay  him,  although  both  are 
accommodation  indorsers.*''  The  rule  in  its  first  aspect  means  that 
the  contract  which  each  indorser  makes  when  he  indorses  the  paper 
is,  that  he  is  liable  to  every  subsequent  indorsee,  and  that  every 
antecedent  party  is  liable  to  him.  The  liability  is  several.  It  is 
successive.     And  the  object  of  the  rule  in  its  first  aspect  is  only  to 

8B  Harrop  v.  Fisher,  9  Wkly.  Rep.  667,  10  C.  B.  (N.  S.)  190;  Hedges  v.  Sealy, 
9  Barb.  214;  Freund  v.  Importers'  &  Ti-aders'  Nat.  Bank,  6  Thomp.  &  C. 
236;  Woodworth  v.  Huntoon.  40  111.  131.  Johns.  Cas.  Bills  &  N.  150;  Minor 
V.  Bewick.  55  Mich.  491,  22  N.  W.  12. 

86  Easterly  v.  Barber.  6G  N.  Y.  433;  Greusel  v.  Hubbard,  51  Mich.  95.  16 
N.  W.  2JS;    Brewer  v.  B&ynton,  71  Mich.  254,  39  N.  W.  40. 

8T  Kelly  V.  Burroughs,  102  N.  Y.  93,  6  N.  E.  109;  Hollo  way  v.  Quinn,  18 
Wkly.  Notes  Cas.  284. 


Ch.   4]  REQUISITES    OF    INDORSEMENT.  133 

maintain  these  indorsements  in  the  regular  order  of  their  liability. 
It  does  not  go  further  than  this.  Thus  where  *^  A  made  a  note  pay- 
able to  B  or  order,  and  B  afterwards  indorsed  the  note  to  C,  who 
afterwards  indorsed  it  to  B  again,  the  court,  upon  suit  by  B 
against  C,  refused  a  recovery  because  it  was  a  prior  indorser  calling 
upon  a  subsequent  one;  and  the  inference  of  the  decision  is  that 
this  course  was  not  allowed  because  it  involved  circuity  of  action. 
A  prior  holder,  if  he  be  an  indorser,  cannot  again  be  an  indorser, 
because  he  has  no  remedy  against  the  intermediate  parties,  for 
they  would  have  their  remedy  over  against  him,  and  the  result  would 
be  to  place  the  parties  in  precisely  the  same  situation  as  before 
any  action  at  all.®'  The  second  aspect  of  the  rule  is  that  when  an 
indorser  is  some  person  other  than  a  subsequent  holder,  if  he  be 
not  a  double  indorser,  he  is  either  an  indorser  or  else  is  not  liable  at 
all,  or,  if  liable,  he  is  either  a  guarantor  or  a  joint  maker.®**  This 
phase  it  is  purposed  to  discuss  in  the  next  section. 
Necessity  for  Delivery. 

As  in  the  case  of  the  inception  of  the  original  contract  rights 
under  the  principal  terms  of  the  instrument,  and  also  under  the 
acceptance,  an  indorsement  requires  delivery.®^  And  the  rules  and 
reasons  relating  to  the  delivery  of  an  indorsed  instrument  by  the 
payee  or  indorser  are  in  most  respects  the  same  as  those  already 
given  relating  to  the  delivery  of  bills  and  notes  and  of  acceptances. 
The  negotiation  of  the  instrument  begins  with  the  act  of  indorse- 

88  Bishop  V.  Hay  ward,  4  Term  R.  470. 

88  In  Wilders  v.  Stevens,  a  bill  was  drawn  by  plaintiffs  to  their  order,  on 
J.  H.,  and  that  it  was  then  indorsed  by  plaintiffs  to  defendant  and  by  de- 
fendant to  plaintiffs.  It  was  claimed  that  circuity  of  action  would  arise  from 
such  indorsement.  It  was  shown  in  the  pleading  that  the  indorsement  by  the 
defendant  was  to  make  him  liable  as  surety,  and  the  court  held  that,  inas- 
much as  the  defendant  could  not  sue  the  plaintiff,  the  objection  as  to  circuity 
being  removed,  the  plaintiffs  might  recover  from  the  defendant.  15  Mees.  & 
W.  208.    See  Bishop  v.  Hayward,  supra. 

0  0  Bank  of  Jamaica  v.  Jefferson,  92  Tenn.  537,  22  S.  W.  211;  Id.,  Johns.  Cas, 
Bills  &.  N.  126. 

81  Spencer  v.  Carstarphen,  15  Colo.  445,  24  Pac.  882;  Id.,  Johns.  Cas.  Bills 
&  N.  117;  Pardee  v.  Lindley,  31  111.  174;  Richards  v.  Darst,  51  111.  140;  Badg- 
ley  V.  Votrain,  68  IlL  25;  Kyle  v.  Thompson,  2  Scam.  432. 


134  INDORSEMENT.  [Ch.  4 

ment  as  distinguished  from  the  intention  of  the  parties  to  indorse,** 
and  is  consummated  by  the  delivery  of  the  instrument  and  its  ac- 
ceptance with  the  intention  to  pass  and  vest  title.  On  these  sim- 
ple acts  the  whole  contract  rests.  The  law  prima  facie  presumes 
the  other  elements  of  contract.  For  example,  delivery  once  being 
made  and  the  title  having  once  passed,  these  facts  of  themselves 
import  a  consideration.®^  Possession  of  the  instruments  obviates 
the  necessity  of  pleading  delivery,  non-delivery  being  wholly  a 
matter  of  affirmative  defense.®*  And  the  term  "indorsed"  in  plead- 
ing includes  delivery  for  value  to  the  indorsee."'  But  both  indorse- 
ment and  delivery  must  concur  in  the  transfer.®"  The  indorsement 
without  delivery  is  nothing,  although  the  indorser  has  in  fact  signed 
his  name  and  the  indorsee  knows  that  it  is  signed.      Still  the  con- 


8  2  Goshen  Nat.  Bank  v.  Bingham,  118  N.  T.  349,  23  N.  E.  180. 

88  Hook  V.  Pratt,  78  N.  Y.  371;  Durham  v.  Manrow,  12  N.  Y.  533;  Keteltas 
V.  Myere,  19  N.  Y.  231;  Russell  v.  Whipple,  2  Cow.  536:  Chappell  v.  Bissell, 
10  How.  Prac.  274;   Marshall  v   Rockwood,  12  How.  Prac.  452. 

84  Peets  V.  Bratt,  6  Barb.  662;   Lafayette  Ins.  Co.  v.  Rogers,  30  Barb.  49. 

8  6  In  the  case  of  Marston  v.  Allen,  8  Mees.  &  W.  494,  one  Han*op,  a  bank 
accountant,  drew  a  bill  payable  to  himself  upon  defendant,  who  was  indebted 
to  the  bank,  which  was  accepted  by  defendant.  The  bill  was  signed  on  the 
back  by  Harrop  and  given  to  W.  Marston,  another  employe,  to  keep  for  the 
bank.  It  was  testified  by  E.  Marston  that  he  received  this  bill,  for  value, 
from  W.  Marston,  and  that  he  had  indorsed  and  delivered  it  for  value  to  the 
plaintiff.  It  was  held  that  the  indorsement  and  delivery  of  the  bill  to  W. 
Marston  was  not  to  him  as  indorsee,  and  was  consequently  not  such  indorse- 
ment as  to  transfer  the  bill.  In  Adams  v.  Jones,  a  bill  drawn  on  and  ac- 
cepted by  defendant  was  indorsed  In  blank  by  J.  F.  and  delivered  to  plain- 
tiff to  deliver  to  R.  The  defendant,  being  accepter,  was  notified  by  R.  not  to 
pay  to  plaintiff,  and  refused  payment.  On  the  action  in  assumpsit  being 
brought,  it  was  held  that  plaintiff  had  no  title  to  sue,  but  that  he  held  the 
bill  only  as  the  seiwant  of  R.  12  Adol.  &  E.  455.  Federick  v.  Winans,  51  Wis. 
472,  8  N.  W.  301;  Higgins  v.  Bullock,  00  111.  37;  Freeman's  Bank  v.  Ruckman, 
16  Grat.  129;   Dann  v.  Norris,  24  Conn.  333. 

86  In  Buckley  v.  Hann,  the  action  was  upon  a  bill  drawn  by  W.  and  In- 
dorsed to  plaintiff,  and  It  was  shown  that  the  bill  was  drawn  and  accepted 
and  W.'s  name  signed  upon  it,  and  that  it  was  then  sent  to  plaintiff,  who 
lived  some  distance  from  London,  W.'s  residence.  Under  the  statute  requiring 
that  the  whole  cause  of  action  must  arise  in  the  city  it  was  held  thftt  the 
action  could  not  be  maintained,  since  indorsement  was  inoperative  without 
delivery.    5  Exch.  43. 


Ch.   4]  ANOMALOUS    INDORSEMENTS.  185 

tract  so  far  as  it  bas  gone  may  be  revoked  by  the  indorsor,  and  the 
indorsement  countermanded,®''  unless  some  contract  right  other 
than  that  of  the  indorsement  itself  exists  in  the  indorsee.  The  de- 
livery must  be  by  the  indorser,  otherwise  the  transfer  of  the  instru- 
ment is  not  by  his  order.  His  executor  or  administrator  even  can- 
not make  delivery,  although  the  payee  before  his  decease  has  writ- 
ten his  name  upon  it.®^  So,  too,  if  a  transferee  of  a  bill  or  note 
send  it  back  to  his  indorser,  refusing  to  accept  it,  this  is  a  refusal 
of  an  offer,  and  his  subsequently  getting  possession  of  the  in- 
strument without  the  assent  of  the  indorser  will  not  invest  him  with 
title,  because  there  was  then  no  intention  to  contract  present  be- 
tween them  and  hence  no  contract.®* 

ANOMALOUS  INDORSEMENTS. 

67.  A  person  -whose  name  is  on  the  back  of  a  bill  or 
note,  transferable  by  delivery,  or  payable  to  bearer,  is  to 
be  deemed  an  indorser. 

68.  A  person  signing  on  the  back  of  a  bill  or  note  pay- 
able to  order  before  the  payee  is  prima  facie  presumed  to 
be  a  second  indorser,  and  not  liable  to  the  payee;  but 
this  may  be  rebutted  by  sho-wing  that  his  indorsement 
■was  given  to  give  the  maker  credit  "with  the  payee,  and 
he  thus  becomes  liable  as  first  indorser,  the  payee  being 
permitted  to  indorse  to  him  -without  recourse. 

These  two  rules  instance  the  commonest  forms  of  irregular  in- 
dorsements. The  first  raises  the  question  of  the  legal  effect  of  an 
indorsement  upon  an  instrument  payable  to  bearer  by  a  person 

»T  Brlnd  v.  Hampshire,  1  Mees.  &  W.  365. 

98  Bromage  v.  Lloyd,  1  Exch.  32;   Marston  v.  Allen,  8  Mees.  &  W.  494. 

89  Cartwright  v.  Williams,  2  Starkie,  340.  Thus,  in  the  case  of  Brind  v. 
Hampshire,  one  Usher  indorsed  a  bill,  payable  to  himself,  to  the  order  of  B., 
and  gave  it  to  the  defendant  to  deliver  to  B.  Before  this  had  been  done, 
Usher  directed  defendant  not  to  deliver  the  bill.  B.,  knowing  the  facts, 
brought  action  in  trover  to  recover  the  bill.  It  was  held  that  the  indorsement 
without  delivery  was  insufficient  to  give  B.  the  right  to  maintain  the  action. 
There  was  no  binding  obligation  between  plaintiff  and  defendant,  merely  an 
inchoate  contract.    1  Mees.  &  W.  3G5. 


136  INDORSEMENT.  [Ch.  4 

whose  name  does  not  otherwise  appear  as  a  party  to  the  contract;  ^**° 
the  second,  the  legal  effect  of  ai  indorsement  upon  an  instrument 
made  payable  to  a  specific  payee,  but  indorsed  before  the  payee  has 
indorsed  and  transferred  the  instrument.  In  this  last  question  the 
explanation  is  complicated  by  the  fact  that,  in  strict  legal  theory, 
the  indorsee  would  have  no  place  either  in  the  transferring  the  in- 
strument or  incurring  liability.  The  payee  would  transfer  and 
incur  liability  to  his  immediate  indorsee,  and  the  irregular  indorser 
would  thus  be  eliminated  from  the  instrument  entirely. 

In  both  of  these  cases  the  underlying  principle  is  the  same, — to 
effect  the  intent  of  the  parties,  and  to  treat  each  case  as  an  indorse- 
ment.*"^ If  a  person  puts  his  name  on  the  back  of  an  instrument  at 
the  time  it  is  made,  either  because  he  promises  to  become  responsi- 
ble for  it,  or  because  he  participates  in  its  consideration,  he  is  and 
ought  to  be  as  much  liable  as  if  he  were  in  fact  a  joint  maker.  If 
his  indorsement  is  subsequent  to  the  making  of  the  note,  and  he 
has  nothing  to  do  with  the  original  consideration  but  puts  his  name 
on  the  note  to  add  to  the  security,  he  is  and  ought  to  be  as  much 

100  In  Moore  v.  Cross,  It  was  held  that  where  a  party  has  Indorsed  a  note 
payable  to  some  third  person  or  order,  though  simply  for  the  accommodation 
of  the  malier,  he  is  liable  as  an  indorser  to  such  third  person,  19  N.  Y.  227. 
In  Boynton  v.  Pierce,  the  name  of  defendant  was  Indorsed  on  note,  there 
being  no  evidence  on  its  face  that  he  had  any  connection  with  the  Instru- 
ment. It  was  held  the  defendant  was  presumptively  a  guarantor,  but  also 
held  that  this  presumption  was  rebuttable,  and  that  it  might  be  shown  that 
such  blank  indorsement  was  simply  a  guaranty  of  collection,  or  that  defend- 
ant was  only  an  indorser.  79  111.  145.  Burpee  v.  Smoot,  4  Wkly.  Notes 
Cas.  (Pa.)  186. 

101  In  the  case  of  Seabury  v.  Hungerford,  an  action  was  brought  on  a 
promissory  note  on  the  back  of  which  was  the  following:  "John  I.  Hunger- 
ford,  backer,  Schoharie."  It  was  held  that,  such  indorsement  being  only  to 
secure  the  payee,  the  indorser  was  liable  as  such  only,  and  not  as  maker  or 
guarantor.  "This  was,  in  legal  effect,  regular  mercantile  paper,  upon  which 
the  defendant  contracted  the  obligation  of  an  Indorser,  •  •  *  and  by  that 
obligation,  and  no  other,  he  is  bound.  •  •  •  The  only  inference  is  that  he 
Intended  to  give  the  maker  credit  by  becoming  answerable  as  indorser." 
Bronson,  J.,  in  Seabury  v,  Hungerford,  2  Hill  (N.  Y.)  80.  See,  also,  Sylvester 
V.  Downer,  20  Vt.  355;  Miller  v.  Pollock,  99  Pa.  St.  206.  As  to  joint  maker, 
see  Herbage  v,  McEntee,  40  Mich.  337;  Moynahan  v.  Hanaford.  42  Mich. 
S2U.  3  N.  W.  944;    Barron  v.  Cady.  40  Mich.  259. 


Cb.   4 J  ANOMALOUS    INDORSEMENTS.  137 

liable  as  if  in  tact  he  had  been  a  guarantor.  Therefore,  in  case  of 
instruments  payable  to  bearer,  or  to  a  particular  person  or  bearer, 
or  to  a  particular  person  or  order,  and  indorsed  in  blank,  all  of 
which  pass  by  delivery,  such  a  person  is  to  be  deemed  responsible 
as  an  indorser,^"^  because  the  inducement  and  intent  of  such  a  writ- 
ing was  plainly  nothing  else  and  could  have  no  other  meaning  in 
mercantile  law  than  to  make  such  a  person  liable  as  indorser  in 
case  of  the  failure  of  the  principal  after  the  holder  had  exercised 
due  diligence  in  attempting  the  collection.  This  rule  applies  to 
the  payee  where  he  indorses  and  delivers  over  a  note  or  bill  so  in- 
dorsed. He  is  entitled  to  all  the  privileges  of  a  first  indorser,  as 
between  himself  and  the  indorsee.^"' 

In  New  York,  in  case  of  instruments  made  payable  to  the  order 
of  a  specific  person,  a  curious  device  has  been  adopted  for  carrying 
into  effect  the  intention  of  the  parties.  The  problem  was  to  over- 
come the  legal  presumption  from  the  face  of  the  note  that  such  an 
indorser  stood  in  the  position  of  a  subsequent  indorser  to  the  payee. 
So  far  as  the  paper  showed  the  record  of  the  transaction,  such  an 

102  In  the  case  of  President,  etc.,  of  Union  Bank  v.  Willis,  an  action  was 
brought  on  a  note,  payable  to  W.  or  order,  made  by  T.  M.'s  name  was  on 
the  bacli  in  blank,  and  under  it  was  W.'s  name,  also  In  blank.  T.  presented 
the  note  to  a  bank,  and  it  was  discounted.  T.  failed  to  pay,  and  notice  was 
^ven  to  TV.  and  M.,  but  the  note  was  not  presented  to  M.  for  payment.  In  a 
suit  by  the  bank  against  W.  as  indorser.  It  was  held  that  T.  and  M.  stood 
in  the  relation  of  joint  and  several  promisors.  The  defendant  was  an  In- 
dorser, liable  only  upon  legal  notice  of  a  demand  upon  the  promisors  and  a 
refusal  by  them  to  pay  the  note.     8  Mete.  (Mass.)  504. 

103  Dean  v.  Hall,  17  Wend.  214;  Hill  v.  Lewis.  1  Salk.  132;  Hodges  v.  Stew- 
ard, Id.  125.  In  this  case  it  was  held  that  while  an  assignment  of  a  bill  paya- 
ble to  A  B  or  bearer  is  no  good  assignment  to  charge  the  drawer  with  an 
action  on  the  bill,  it  is  nevertheless  a  good  bill  between  indorser  and  Indoi-see; 
*  *  *  for  the  indorsement  is  in  the  nature  of  a  new  bill.  In  Nicholson  v. 
Sedgwick,  it  was  held  that  where  a  note  was  payable  to  A  B  or  bearer,  and 
such  note  was  delivered  for  value  to  a  third  person  by  A  B,  the  action  must 
be  brought  in  the  name  of  A  B.  1  Ld.  Raym.  180.  In  Buller  v.  Crips,  It  was 
h-eld  that  a  promissory  note  to  A  B  or  order  would  not  support  an  action  by 
indorsee  against  the  maker.  6  Mod.  29.  To  same  effect  see  Robinson  v. 
Brown.  4  Blackf.  (Ind.)  128;  Bates  v.  Butler,  40  Me.  387;  Gilbert  v.  Nan- 
tucket Bank,  5  Mass.  97;  Thacher  v.  Stevens,  46  Conn.  561;  National  Bank  v. 
Dorset  Marble  Co.,  61  Vt.  106,  17  Atl.  42. 


138  INDORSEMENT.  [Ch.   4 

indorser  could  onl}^  be  presumed  to  have  intended  to  become  liable 
as  second  indorser,  and  could  only  be  regarded  as  such,  and  of 
course  not  liable  upon  the  instrument  to  the  payee,  who  was  sup- 
posed to  be  the  first  indorser.  The  court,  construing  the  instru- 
ment before  it,  was  bound  to  consider  the  order  of  its  transfer,  as, 
first,  from  the  maker  or  drawer  to  the  payee;  second,  an  indorse- 
ment by  the  payee  to  the  irregular  indorser  as  his  indorsee;  and 
lastly,  by  the  irregular  indorser  to  the  subsequent  indorsee  on  the 
paper.  Thus,  the  payee  could  not  hold  such  an  indorser  liable  be- 
cause he  was,  so  far  as  the  paper  showed,  his  indorsee.^"*  But  the 
courts  soon  saw  that  carrying  this  doctrine  to  all  lenglhs  would 
often  mean  the  enforcement  of  theory  at  the  expense  of  justice,  and 
of  defeating  the  intent  of  the  parties.  The  purpose  of  the  irregular 
or  anomalous  indorser  in  making  the  indorsement,  and  of  the  payee 
in  receiving  the  instrument  with  such  an  indorsement,  was  to  enter 
into  a  contract  of  indemnity.  The  payee  took  the  instrument  for 
value  because  the  indorser's  name  was  there.  Hence  in  such  cases 
the  rule  was  relaxed.  The  paper  itself  was  held  to  furnish  only 
prima  facie  evidence  of  this  intention.  It  was  competent  to  rebut 
this  presumption  by  parol  proof  that  the  indorsement  was  made  to 
give  the  maker  credit  with  the  payee.  To  meet  the  objection  that 
the  payee,  in  order  to  complete  the  chain  of  transfer,  must  needs 
be  the  first  indorser,  the  payee,  as  holder,  was  permitted  to  indorse 
the  instrument  to  the  accommodation  indorser  without  recourse, 
and  to  fill  up  the  blank  indorsement  of  the  accommodation  indorser 
to  himself.  In  this  way  the  parties  were  placed  in  the  same  posi- 
tion as  if  the  maker  had  in  the  first  instance  delivered  the  note 
to  the  payee,  the  payee  had  then  indorsed  it  without  recourse  to  the 
accommodation  indorser,  and  the  accommodation  indorser  had  then 
indorsed  it  to  the  payee.  This,  moreover,  could  be  done  at  any 
time, — on  the  trial,  or  even,  if  omitted  then,  on  an  appeal.  The 
practical  effect  of  this  course  was  to  obviate  the  difiSculty  raised  by 
the  other  rule  we  have  just  mentioned, — that,  where  an  instrument 
came  into  the  hands  of  a  person  who  already  appeared  upon  it  as  a 
payee,  he  could  not  maintain  an  action  against  any  of  the  parties 

104  Herrick  v.  Carman,  12  Johns.  159;  Tillman  v.  Wheeler,  17  Johns.  325; 
Bacon  v.  Burnham,  37  N.  Y.  614;  Phelps  v.  Vischer,  50  N.  Y.  69. 


Ch.    4]  ANOMALOUS    INDORSEMENTS.  139> 

whose  indorsements  were  subsequent  to  the  first  appearance  of  his 
name,  because  each  of  these  persons,  on  paying  him  the  note,  would 
have  an  immediate  right  to  demand  paj'ment  from  him  on  his  ear- 
lier indorsement.  The  law  in  such  case,  to  avoid  this  circuity, 
denied  him  the  right  of  action.  But,  by  the  intervention  of  thia 
device,  this  defense  of  circuity  was  not  available  against  him,  be- 
cause the  irregular  or  anomalous  indorser,  under  his  agreement  of 
indemnity  with  the  payee,  could  have  no  right  of  action  against  the 
payee,  and,  the  reason  failing,  the  rule  itself  fell  to  the  ground.^**"^ 
It  is  important  to  notice  that  it  is  incumbent  on  the  payee  suing  the 
indorser  to  show  that  such  indorsement  was  made  by  the  indorser 
to  give  credit  to  the  note,  and  was  taken  by  him  because  of  such 
credit.  He  cannot  be  silent  upon  this  point,  and  avail  himself  of 
the  rule,  for  the  presumption  is  that  such  an  indorser  is  a  second 
indorser,  and  not  liable  to  the  payee.  The  burden  is  upon  the 
payee  to  show  that,  by  agreement  between  the  parties,  the  liability 
is  otherwise. 

But  these  reasons  and  rules  do  not  prevail  throughout  the 
Union;  nor  do  they  prevail  in  England.  In  the  rule  just  set  fortli 
the  plain  effect  of  the  writing  was  overcome  and  contradicted  by 
parol  evidence.  And  many  of  the  courts  have  not  seen  fit  to  flatly 
defy  this  rule  of  evidence.  These  courts  have  sought  either  to  dis- 
tinguish and  make  the  case  an  exception  to  this  rule  of  evidence^ 
or  to  carry  out  the  intention  of  the  parties  in  other  ways.  In  dis- 
tinguishing the  rule  they  have  made  a  difference  in  its  application 
to  immediate  and  to  remote  parties.  Between  immediate  parties 
it  was  thought  that  the  indorsement  in  blank  implied  an  authority 
to  write  over  it  anything  that  was  in  fact  agreed  upon  by  the  par- 
ties. It  was  therefore  perfectly  competent  both  to  show  by  parol 
evidence  what  this  agreement  was,  and  also,  such  agreement  being 
shown,  for  the  courts  to  carry  it  into  effect.     If  the  agreement  was 

loB  Hall  V.  Newcomb.  3  Hill,  233,  s.  c.  in  error  7  Hill.  416.  In  this  case  a 
promissory  note  payable  to  H.  was  made  by  F.  This  was  Indorsed  in  blank 
by  N.  for  the  accommodation  of  F.,  and  knowing  that  It  was  the  intention  of 
F.  to  obtain  money  from  H.  upon  It.  H  took  the  note  and  supplied  the 
amount  desired.  N.  was  held  not  to  be  liable  to  H.  as  maker  or  guarantor, 
but  to  be  liable  as  an  indorser  only.  Moore  v.  Cross,  19  N.  Y.  227;  Coulter 
V.  Richmond.  59  N.  Y.  478;  Jaffray  v.  Brown,  74  N.  Y.*393. 


140  INDORSEMENT.  [Ch.   4 

to  indorse,  then  the  writing  of  the  name  was  to  be  an  indorse- 
ment,^"" if  to  guaranty,  then  the  writing  was  to  be  a  guaranty;  ^°^ 
and  so  likewise  in  cases  of  surety  or  joint  maker.^°*  But  in  case  of 
remote  parties,  the  same  reason  could  not  obtain.  Between  them 
there  can  be  no  mutual  understanding,  and  therefore  this  rule,  so 
far  as  showing  by  the  words  or  acts  of  the  parties  what  was  meant 
by  the  writing,  was  rejected.^**"  The  courts  then  fell  back  upon 
the  principle  that  the  business  attitude  of  the  party  signing  must 
have  meant  something,  and  that,  assuming  this  to  have  been  his 
intention,  they  will  support  his  act  as  a  contract  of  some  sort, 
rather  than  let  it  fail  as  a  void  obligation.  This  has  given  rise  to  a 
chaos  of  conflicting  authorities,  but  from  out  of  it  the  following 
rules  have  been  classified:  ^^"  In  some  jurisdictions,  it  being  pre- 
sumed there  was  some  liability  to  the  payee  intended  by  the  person 
writing  his  name  upon  the  instrument,  it  is  declared  that  such  lia- 
bility was  that  of  a  maker  before  delivery  and  of  a  guarantor  after 
delivery,  or  else  that  such  liability  was  intended  to  be  that  of  a 
maker  or  a  guarantor  at  all  times  and  to  all  parties,  irrespective 
of  the  fact  when  the  instrument  was  delivered.  This  last  position 
eliminated  the  question  of  sole  liability  to  the  payee  entirely.  In 
other  jurisdictions  it  was  assumed  that  such  person  was  intended 
to  be  a  second  indorser,  against  whom  the  payee  could  have  no  re- 
covery. And  in  England  it  seems  the  doctrine  that  such  indorser 
is  under  no  liability  at  all.^^^  It  is  impossible,  in  a  work  of  this 
character,  to  discuss  at  length  the  reasons  for  these  various  posi- 
tions, and  compare  their  merits.  All  that  can  be  done  here  is  for 
the  student  to  fix  in  his  mind  the  general  classification,  and  then,  if 
it  is  so  desired,  the  doctrine  must  be  followed  in  each  separate  state 
•from  the  authorities  referred  to. 

loe  Eberhart  v.  Page,  89  111.  550;  Mammon  v.  Hartman,  51  Mo.  169. 

107  Camden  v.  McKoy,  3  Scam.  43;  Taylor  v.  French.  2  Lea.  260. 

108  Rey  V.  Simpson,  22  How.  341;  Walz  v.  Alback,  37  Md.  404. 

109  Houston  V.  Bruner,  39  Ind.  383;  Whitehouse  v.  Hanson^  42  N.  H.  18. 

110  Cromwell  v.  Hewitt,  40  N.  Y.  491,  note,  p.  492.  The  student  is  referred 
to  this  note,  and  also  to  the  note  of  Prof.  Ames  (volume  1,  p.  2G9)  to  Boynton 
V.  Pierce,  for  a  large  number  of  collated  cases,  which  are  the  authority  for 
the  above  statement 

1112  Ames,  Bills  &  N.  p.  839,  supported  by  the  negative  authority,  Lecaan 
T.  Kirkman,  G  Jur.  (N.  S.)  17;  Steele  v.  McKinlay,  5  App.  Cas.  754;  Gwinnell 
v.  Herbert,  5  Adol.  &  E.  436. 


Ch.   5]  ACCEPTOR    AND    MAKER.  141 

CHAPTER  V. 

OP  THE  NATURE  OF  THE  LIABILITIES  OF  THE  PARTIES. 

69.  Acceptor  and   Maker. 

70.  Facts  Which  the  Acceptor  is  Estopped  to  Deny, 

71.  Facts  Which  the  Acceptor  does  not  Admit 
72-73.  Acceptor  Supra  Protest 

74-76.  Drawer  and  Indorser. 

77.  Warranties  or  Facts  Which  the  Drawer  Is  Estopped  to  Deny. 

78.  Warranties  or  Facts  Which  the  Indorser  is  Estopped  to  Deny. 

79.  Indorser  without  Recourse. 

80.  Damages  against  the  Acceptor,  Maker,  Drawer,  and  Indorsers  upon 

the  Bill  and  upon  the  Warranties. 
81-83.    Accommodation  Parties  and  Persons  Accommodated. 

ACCEPTOR  AND  MAKER. 

69.  The  acceptor  and  maker  each  promises  the  payee  and 
subsequent  holders  that  he  -will  pay  the  bill  or  note  ac- 
cording to  its  tenor  at  the  time  of  signing. 

Under  §  55,  we  commented  upon  the  shifting  relations  of  the 
holder  with  the  drawer  and  the  drawee  or  acceptor  of  a  bill  before 
and  after  acceptance.  And  in  a  later  section  we  shall  show  that 
the  phrase,  "The  acceptor  of  a  bill  and  the  maker  of  a  note  is  the 
principal  debtor  thereon,"  means  that  as  against  them  there  is  no 
necessity  for  presentment  at  a  particular  place,  or  of  protest,  or  of 
notice  of  dishonor,  and  that  all  parties  look  to  them  to  eventually 
pay  the  instrument.  As  has  been  shown,  the  bill  and  its  accept- 
ance amounts  to  a  transfer  to  the  holder  of  property  of  the  drawer 
in  the  acceptor's  hands  to  the  amount  of  its  face  value.  In  tech- 
nical phrase,  there  is  a  direct  privity  of  contract  between  the  holder 
and  acceptor,  and  at  common  law  an  acceptance  was  evidence  of 
money  had  and  received  by  the  acceptor  to  the  use  of  the  holder.^ 
The  drawer  is  presumed  to  draw  upon  his  funds  in  the  hands  of  the 
drawee;   the  payee  is  presumed  to  have  given  a  full  value  for  the 

1  Black  V.  Caffe,  7  N.  Y.  281;   Wolcott  v.  Van  Santvoord.  17  Johns.  248. 


142  OF    THE    NATURE    OF    THE    LIABILITIES    OF    THE    PARTIES.       [Ch.   5 

bill;  and,  when  the  drawee  accepts  the  bill,  he  becomes  an  imme- 
diate debtor  to  the  payee,  as  upon  a  valuable  consideration  paid  to 
the  drawer  by  the  payee  and  by  the  drawer  to  the  acceptor  of  the 
funds  in  the  hands  of  the  acceptor.  The  acceptor  stands  in  the 
same  relation  to  the  payee  as  the  maker  of  a  note  does  to  the  in- 
dorsee; and  the  drawer  is  regarded  in  the  light  of  an  indorser. 

But  the  student  must  not  identify  the  acceptor  of  a  bill  and  the 
maker  of  a  note  further  than  that  they  make  the  same  promise  to 
the  payee  and  subsequent  holders.  Beyond  this  point  they  differ. 
An  acceptor  enters  into  a  contract  relation  based  upon  rights  or 
liabilities  accruing  to  or  against  the  drawer,  payee,  and  perhaps  in- 
dorsers.  The  maker  can  make  but  one  contract,  and  that  is  with 
the  payee.  All  other  rights  and  liabilities  arising  to  or  against  the 
makers  of  notes  are  merely  a  transfer  of  such  as  the  payee  himself 
has.  But  with  the  acceptor,  there  is  a  call  for  the  adjustment  of 
the  conflicting  rights  of  drawer  and  acceptor,  drawer  and  payee, 
payee  and  acceptor,  and  perhaps  of  indorsers  with  each  of  these 
parties  and  with  each  other  prior  to  the  time  of  acceptance — a  body 
of  rights  and  liabilities  distinct  from  any  involved  in  the  making  of 
a  note.  These  will  be  discussed  therefore  in  the  sections  next  fol- 
lowing. All  that  is  meant  to  say  here  is  that  there  is  no  difference 
in  their  contract  classification  between  the  promise  of  the  maker  and 
acceptor  to  pay  the  money  called  for  in  the  instrument.^  They  are 
alike,  independently  of  all  other  contract  rights,  a  prima  facie  prom- 
ise to  pay  the  instrument  when  it  becomes  due  according  to  the  tenor 
•of  the  instrument.* 

FACTS  WHICH  THE  ACCEPTOR  IS  ESTOPPED  TO  DENY. 

70.  The  acceptor  of  a  bill  of  exchange,  by  the  accept- 
ance, is  estopped  from  denying  to  a  bona  fide  holder; 

(a)  The  genuineness  of  the  drawer's  signature. 

(b)  The  existence  of  the  dra"wrer. 

(c)  The  capacity  of  the  drawer  to  make  the  draft. 

a  Bull  V.  Sims,  23  N.  Y.  570;  Fairchild  v.  Ogdensburgh  R.  Co.,  15  N.  Y. 
337;  Miller  v,  Thomson,  3  Man.  &  G.  576;  Wardens  &  Vestrymen  of  St. 
James  Church  v.  Moore,  1  Ind.  289;    Marlon  &  M.  R.  R.  v.  Hodge,  9  Ind.  163. 

8  Hoffman  v.  National  City  Bank  of  Milwaukee,  12  Wall.  181. 


Ch.  5]         FACTS    WHICH    THE    ACCEPTOR    IS    ESTOPPED    TO    DENY.  143 

(d)  His  authority  to  draw  for  the  sum  named. 

(e)  Where   the   bill   is   to   the  payee's   order,  that  the 

payee  ^K^a3  competent  to  make  the   indorsement.* 

What  are  called  the  "warranties"  of  the  acceptor  are  a  phase  of 
the  legal  doctrine  of  estoppel.  "An  estoppel,"  says  Lord  Coke,  "is 
when  a  man  is  concluded  by  his  own  act  or  acceptance  to  say  the 
truth."  And  with  bills  the  acceptor  is  precluded  from  testifying 
in  the  instances  given  in  the  principal  text.  It  may  well  be  in  case 
of  an  acceptor  that  his  drawer  had  no  existence,  or  that  his  signa- 
ture is  forged,  or  that  the  acceptor  had  no  funds  of  the  drawer  in 
his  hands  when  he  accepted  the  bill.  But  the  legal  estoppel  shuts 
out  all  evidence  of  these,  and  thus  they  cannot  be  availed  of  as  de- 
fenses. From  this  rule  of  evidence  it  is  but  an  easy  step  to  develop 
a  right  of  quasi  contract.  The  holder  of  the  bill  may,  perhaps,  by 
the  operation  of  this  very  rule,  and  by  its  operation  alone,  be  en- 
abled to  recover  the  amount  of  the  bill  from  the  acceptor.  This 
being  established  as  a  rule  of  business,  it  grows  to  be  something 
more  than  a  mere  rule  of  evidence.  With  indorsements  it  becomes 
a  distinct  right  on  which  persons  may  be  presumed  to  act  when  they 
discount  the  instrument.  With  them  it  is  not  inaccurate  to  speak 
of  these  estoppels  as  warranties,  or  distinct  stipulations  created  by 
law  and  embodied  in  the  contract  indorsement." 

As  between  the  payee  or  some  subsequent  holder,  who  has  taken 
the  bill  in  good  faith,  and  the  acceptor,  whose  acceptance  has  given 

<  These  rules  probably  apply  to  the  acceptor  supra  protest  also. 

B  In  the  case  of  Bank  of  Commerce  v.  Union  Bank,  it  was  held  that  the 
drawee  was  presumed  to  know  the  handwriting  of  the  drawer,  and  the  pay- 
ment of  a  bill  by  him  is  an  admission  which  the  drawer  may  not  deny  as 
between  himself  and  the  holder.  Even  though  such  signature  is  discovered 
subsequently  to  be  a  forgery  the  drawee  cannot  recover  the  amount  paid  to 
an  innocent  holder.  This  rule  is  founded  on  the  presumed  negligence  of  the 
drawee  to  fail  to  detect  an  irregularity  in  the  signature,  but  does  not  apply 
where  the  forgery  is  in  the  body  of  the  bill.  Bank  of  Commerce  v.  Union 
Bank,  3  N.  Y.  230.  And  see  Wilkinson  v.  Lutwidge,  1  Strange,  648.  Where 
a  forged  bill  of  exchange  was  accepted  and  paid  by  the  drawee,  he  cannot 
recover  back  from  the  indorsee  to  whom  he  paid.  Price  v.  Neal.  3  Burrows, 
1354.  An  acceptor  for  honor  does  not  admit  the  genuineness  of  the  drawer's 
signature.    Wilkinson  v.  Johnson,  3  Barn.  &  0.  428,  Johns.  Cas.  Bills  &  N.  83. 


144  OF    THE    NATURE    OF    THE    LIABILITIES    OF    THE    PARTIES.       [Ch.   5 

currency  to  the  bill,  the  latter  must  bear  the  loss,  if  any  arises.  He 
may  not  give  in  evidence  any  of  the  defenses  specified  in  the  prin- 
cipal text."  Tliis  rule  is  based  on  sound  business  reasons.  The 
acceptor's  promise  is  a  distinct  and  separate  one  to  all  parties  who, 
upon  the  faith  of  it,  have  given  value,  in  adjusting  the  equities  be- 
tween parties.  It  is  more  just  to  hold  the  acceptor  to  knowing  his 
own  correspondent  with  whom  he  has  business  dealings  than  to 
subject  every  holder  who  may  take  a  bill  in  its  circulation  to  loss 
or  danger  of  loss  from  parties  of  whom  he  knows  nothing.  When 
the  acceptor  and  the  holder  are  each  innocent,  the  acceptor,  who 
had  the  best  means  of  knowledge,  is  the  more  negligent  of  the  two, 
and  therefore  the  equities  are  against  him. 

Price  V.  Neal  ^  is  usually  quoted  as  the  leading  case  in  illustration 
of  this.  This  was  an  action  on  the  case  by  Price  to  recover  from 
Neal  the  sum  paid  him  on  two  bills  of  exchange,  of  which  Price  was 
the  drawee.  One  of  the  bills  had  been  paid  by  Price  without  a 
previous  acceptance;  and  the  other  was  first  accepted,  and,  after 
acceptance,  indorsed  for  value  to  the  defendant,  and  then  paid  at 
maturity.  There  had  been  a  forgery  of  the  drawer's  signature  in 
the  case  of  both  bills.  Lord  Mansfield  said:  "It  was  incumbent 
upon  the  plaintiff  to  be  satisfied  that  the  bill  drawn  upon  him  was 
the  drawer's  hand  before  he  accepted  it  or  paid  it;  but  it  was  not 
incumbent  on  the  defendant  to  inquire  into  it."  This  means  that 
it  is  a  just  and  reasonable  rule  in  the  conduct  of  business  to  require 
the  acceptor,  when  the  bill  is  presented  for  acceptance  or  payment, 
to  examine  the  signature  of  the  drawer.  He,  better  than  the  payee 
or  any  innocent  third  party,  can  be  supposed  to  know  the  signature 

«  Wbere  one  has  made  a  bona  fide  purchase  for  value  of  a  bill  of  exchange, 
before  It  was  accepted,  or  before  the  drawee  knew  of  its  existence,  the  ac- 
ceptor will  not  be  estopped  from  showing  that  the  drawer's  signature  Is  not 
genuine.  In  this  case  the  acceptors  had  done  nothing  to  Induce  the  holder 
to  believe  that  the  signature  was  genuine  at  the  time  of  his  purchase,  and 
consequently  he  had  no  right  of  action  against  them.  McKleroy  v.  Southern 
Bank  of  Kentucky,  14  La.  Ann.  458;  Hoffman  v.  Bank  of  Milwaukee,  12 
Wall.  181.  As  to  the  responsibility  of  a  bank  paying  a  check  upon  It  for  the 
genmneness  of  the  drawer's  signature,  see  National  Bank  of  North  America 
v.- Bangs.  106  Mass.  441:  Mackintosh  v.  Eliot  Nat.  Bank,  123  Mass.  393; 
Merchants'  Nat.  Bank  v.  Eagle  Nat  Bank.  101  Mass.  281. 

'  Price  V.  Neal,  3  Burrows,  1354. 


Ch.   5]  FACTS    WHICH    THE    ACCEPTOR    IS    ESTOPPED    TO    DENY.  145 

and  handwriting  of  the  drawer, — usually  his  customer  or  corre- 
spondent. He,  rather  than  such  party,  should  be  held  to  detect  the 
forgery,  or  to  know  the  fact  that  he  had  no  funds  of  the  drawer  in 
his  hands,  or  that  he  had  no  legal  right  to  enter  into  a  binding  con- 
tract; and  if  he  fails  in  such  examination,  and  acknowledges  by 
his  acceptance  the  genuineness  of  the  right  to  make  the  order  upon 
him  contained  in  the  bill,  it  is  his  neglect,  and  must  be  his  loss, 
rather  than  that  of  any  one  who  has  taken  the  bill  in  good  faith 
and  for  value.® 

These  fundamental  reasons,  which  we  have  given  in  the  particu- 
lar instance  of  forgery  of  the  drawer's  signature,  have  governed  the 
courts  in  the  other  cases  we  have  classified.  Where  there  is  no 
such  person  in  fact  as  the  drawer,  then  it  has  been  decided  ®  that 
the  fair  construction  of  the  acceptor's  undertaking  is  that  he  will 
pay  to  the  order  of  the  same  person  that  signed  for  the  drawer. 
He  ought  not  to  have  accepted  the  bill  without  knowing  whether 
or  not  there  were  such  persons  as  the  supposed  drawers.  If  he 
chooses  to  accept  without  making  the  inquiry,  then  he  must  be  con- 
sidered as  undertaking  to  pay  to  the  signature  of  the  person  who 
actually  drew  the  bill. 

Closely  connected  with  this  is  the  kindred  doctrine  that  the  ac- 

8  Hoffman  v.  National  City  Banli  of  Milwaukee,  12  Wall.  193;  Bank  of  U. 
S.  y.  Bank  of  Georgia,  10  Wheat.  333;  Smith  v.  Chester,  1  Term  R.  655; 
Bass  v.  Clive,  4  Maule  «&  S.  15;  Bank  of  Commerce  v.  Union  Bank,  3  N.  Y. 
(3  Comst.)  230;  Goddard  v.  Merchants'  Bank,  4  N.  Y.  (4  Comst.)  149;  Canal 
Bank  v.  Bank  of  Albany.  1  Hill,  287. 

9  Cooper  V.  Meyer,  10  Barn.  &  C.  468.  In  this  case,  the  defendants  accepted 
bills  drawn,  apparently,  by  W..  and  some  by  U.  &  Co.,  and  indorsed  by  the 
same,  for  the  accommodation  of  D..  for  whom  the  bills  were  discounted  by 
plaintiff.  It  was  proved  that  the  drawers  and  indorsers  were  fictitious,  and 
that  the  names  were  written  by  D.  It  was  held  that  defendants  should  not 
have  accepted  without  knowing  whether  or  not  there  were  such  persons  as 
the  supposed  drawers.  As  they  accepted  without  inquiry  they  were  consid- 
ered as  undertaking  to  pay  to  the  signature  of  the  actual  drawer.  In  Bass  v. 
Clive  it  was  held  that  the  acceptor,  before  accepting  a  bill  drawn  upon  him 
in  the  name  of  an  aggregate  firrn,  was  bound  to  know  whether  the  firm  con- 
sisted of  a  plurality  of  persons,  and  when  he  accepted  he  was  estopped  from 
averring  that  it  was  not  in  fact  drawn  by  an  aggregate  firm,  since  he  has 
accredited  the  description  by' accepting  the  bill  when  so  drawn.  4  Maule  & 
S.  13. 

NEQ,  BILLS 10 


146  OK    THE    NATURE    OF    THE    LIABILITIES    OF    THE    PAKTIKS.       [Ch.   5 

ceptor  may  not  set  up  as  a  defense  that  the  drawer  bad  no  capacity 
to  make  the  draft.  He  may  not,  for  instance,  say  that  the  drawer 
is  an  infant  ^°  or  a  lunatic  or  a  married  woman  ^^  or  a  bankrupt,^^ 
or  that,  as  a  corporation,  the  act  of  drawing  was  ultra  vires.^"  It 
is  no  defense  that  the  acceptor  can  recover  nothing  over  against  the 
drawer  because  the  drawer  is  incapacitated  to  make  a  contract,  or 
because  the  acceptor  has  none  of  the  drawer's  funds  in  his  hands. 
The  acceptor  of  a  bill  in  theory  is  presumed  to  accept  upon  the  funds 
of  the  drawer  in  his  hands.  In  ordinary  business  affairs,  the  very 
theory  of  a  draft  implies  that  the  acceptor  is  entitled  to  a  credit 
as  between  him  and  the  drawer  on  their  mutual  current  accounts 
if  he  pays  the  money  called  for  in  the  bill  or  accepts  it.  And  so, 
if  he  accepts  without  funds  in  his  hands,  and  upon  the  credit  of  the 
drawer,  he  must  look  to  the  drawer  for  his  indemnity.^*  If  the 
acceptor  were  permitted  to  say,  "The  drawer  is  an  infant  or  a  lu- 
natic, and  I  will  not  pay  you  upon  this  bill  because  the  drawer  will 
not  pay  me  or  credit  me  upon  our  mutual  account,"  or  if  he  were 
permitted  to  say,  "I  accepted  the  bill  for  the  accommodation  of  the 
drawer,  and  the  payee  or  holder  took  it  knowing  it  to  be  an  accom- 
modation acceptance,^'  and  I  will  not  pay  it,"  these  would  be  very 
serious  objections  to  the  bill  being  negotiated.  The  reason  which 
has  influenced  the  courts  is  well  stated  by  Judge  Lawrence  in 
Charles  v.  Marsden.^®  "It  is  to  be  supposed,"  he  says,  "that  the 
drawer  persuades  a  friend  to  accept  a  bill  from  him  because  he 

10  Taylor  v.  Croker,  4  Esp.  1S7. 

11  Smith  V.  Marsack,  G  C.  B.  4SG. 

12  Braitbwaite  v.  Gardiner.  8  Q.  B.  473. 

13  Halifax  v.  Lyle,  3  Welsb.,  H.  &  G.  446.  In  this  case  a  bill  was  drawn 
by  a  coi-poratiou  on  defendant,  and  was  accepted  by  him.  The  corporation 
then  indorsed  the  bill  to  plaintiff.  To  the  action  on  this  bill,  the  defendant 
pleaded  that  the  corporation  had  no  right  to  indorse.  Held,  that  plea  was 
bad;  that  the  acceptor  of  a  bill  payable  to  drawer's  order  was  estopped  from 
denying  that  the  drawer  had  authority  to  indorse  it. 

i4Hortsman  v.  Henshaw.  11  How.  177;  .Tarvis  v.  Wilson,  46  Conn.  90; 
Heuertematte  v.  MoiTis,  101  N.  Y.  63,  4  N.  E.  1.     • 

16  Grant  v.  EUicott,  7  Wend.  227;  Haiger  v.  Worrall,  69  N.  Y.  370; 
Heuertematte  v.  Morris,  supra;  Canadian  Bank  of  Commerce  v.  Coumbe,  47 
Mich.  358,  11  N.  W.  196. 

le  Charles  v.  Marsden,  1  Taunt.  224. 


Ch.   5]  FACTS    WHICH    the    ACCEPTt)R    DOES    NOT    ADMIT.  147 

cannot  lend  him  money.  Now,  would  there  be  any  objection  if, 
with  the  knowledge  of  the  circumstance  that  this  is  an  accoramoda- 
tipn  bill,  some  person  should  advance  money  upon  it  before  it  was 
due."  The  indorsee  has  discounted  the  bill  on  the  faith  of  the  ac- 
ceptor's promise,  and  it  is  no  answer  for  the  acceptor  to  say  to  him, 
"I  have  received  nothing  for  this  acceptance." 

We  cannot  do  better  than  follow  Mr.  Daniel  in  his  succinct  state- 
ment of  reasons  for  the  rule  that  the  acceptor  warrants,  when  the 
bill  was  indorsed  before  acceptance,  that  the  payee  was  competent 
to  indorse.  To  insure  negotiable  securities  a  ready  circulation,  a 
person  may  not  dispute  the  power  of  another  to  indorse  an  instru- 
ment, when  he  asserts  by  the  instrument  which  he  issues  to  the 
world  that  the  other  has  such  power.  The  drawer  of  the  bill,  on 
his  putting  it  into  circulation,  holds  out  to  all  the  world  that  there 
is  such  a  payee  as  is  described  in  the  instrument,  and  that,  having 
made  the  instrument  payable  to  such  payee's  order,  the  payee  on 
his  part  may  order  the  instrument  paid  to  some  one  else  in  turn. 
When  the  drawee  accepts  the  bill,  he  assents  to  these  two  proposi- 
tions, and  to  the  proposition,  especially,  that  the  payee  is  competent 
to  indorse.  Hence  the  acceptor  may  not  say  that  the  payee  was 
an  infant,  or  an  insane  person,  or  a  bankrupt,  or  a  corooration  with- 
out legal  existence.  "Indeed,"  says  Mr.  Daniel,  "there  could  be  no 
reason  why  the  acceptor  should  be  interested  to  show  that  the  payee 
was  incompetent  to  make  the  order,  for  he  has  been  guarantied  in 
(hat  regard  by  the  drawer,  and  may  charge  the  amount  in  account 
against  him,  whether  the  payee  were  competent  or  not."^'' 

FACTS  WHICH  THE  ACCEPTOR  DOES  NOT  ADMIT. 

71.  An  acceptance  does  not  admit: 

(a)  That  the   payee's   or  subsequent  indorsements 

are  genuine. 

(b)  That  all  the  terms  contained  in  the  bill  at  the 

time  of  acceptance  are  genuine.^* 

17  Daniel,  Neg.  Inst.  §  536. 

i«  This  rule  probably  applies  to  the  acceptor  supra  protest. 


148  OF    THE    NATURE    OF    THE    LIAIULITIES    OP' THE    PARTIES.        [Ch.   6 

The  rules  of  the  acceptor's  estoppel,  as  we  have  seen,  are  based 
upon  the  supi)osed  negligence  of  the  drawee  in  failing,  by  an  ex- 
amination of  the  signature  when  the  bill  is  presented,  to  detect  the 
forgery  of  the  drawer's  name,  and  to  refuse  payment.  The  drawee 
should  be  supposed  to  know  the  handwriting  of  the  drawer, 
who  is  usually  his  customer  or  correspondent,  and,  as  between 
him  and  an  innocent  holder,  the  drawee  from  his  imputed  neg- 
ligence should  bear  the  loss.  But  here  the  courts  stop.  It  is  only 
the  facts  pertaining  to  the  drawer,  such  as  his  existence,  capacity, 
and  authority,  that  the  drawee  can  be  reasonably  presumed  to  be 
familiar  with.  But  of  the  payee's  indorsement,  aside  from  his 
competency  to  indorse,  he  can  know  nothing.^*  Nor  is  there  any 
reason  why  the  acceptor  should  know  that  the  body  of  the  bill  is 
in  the  drawer's  handwriting,  or  in  any  handwriting  known  to  the 
acceptor.  If  the  alteration  or  forgery  conynitted  is  that  of  the 
payee's  name,  or  consists  in  altering  the  date  or  amount  of  the  bill, 
there  is  no  reason  why  the  acceptor  should  be  better  able  than  the 
indorsers  to  detect  an  alteration  or  forgery.  The  forgery  being  in 
the  body  of  the  bill,  or  in  the  payee's  signature,  the  greater  negli- 
gence here  is  chargeable  upon  the  party  who  received  the  bill  from 
the  perpetrator  of  the  forgery.^"  Tlie  result  of  the  foregoing  rule 
is  that,  if  the  signature  of  the  payee  or  of  the  indorser  be  forged, 
the  acceptor  will  not  be  bound  to  pay  the  bill  to  any  one  who  traces 

18  Holt  V.  Ross,  54  N.  Y.  474.  The  general  rule  is  that  the  acceptor  admits 
the  handwriting  of  the  drawer,  but  not  of  the  indorsers,  and  the  holder  is 
bound  to  know  that  the  previous  indorsements,  including  that  of  the  payee, 
are  in  the  handwriting  of  the  parties  whose  names  appear  upon  the  bill.  And, 
if  it  should  appear  that  one  of  them  is  forged,  he  cannot  recover  against  the 
acceptor,  although  the  forged  name  was  on  the  bill  at  the  time  of  acceptance. 
Taney,  C.  J.,  in  Hortsman  v.  Henshaw,  11  How.  177. 

2  0  Bank  of  Commerce  v.  Union  Bank,  3  N.  Y,  230;  White  v.  Continental  Nat. 
Bank,  &4  N.  Y,  G20;  Young  v.  Grote,  4  Bing.  253.  In  this  case  plaintiff  left 
with  his  wife  checks,  signed  in  blank,  on  defendant's  bank.  One  W.,  at  the 
wife's  request,  filled  out  a  check  for  a  certain  amount,  but  in  such  a  way  that 
the  amount  could  be  raised  without  possibility  of  detection.  After  showing 
check  to  the  wife,  W.,  without  authority,  raised  the  value  of  the  check  and 
secured  the  amount  from  defendant.  It  was  held  that  due  care  was  not  taken 
in  filling  cut  the  check,  and,  since  the  negligence  was  the  plaintiff's,  he  alone 
must  suffer. 


Ch.  5]  ACCEPTOR    SUPRA    PROTEST.  149 

title  through  such  indorsements.  And,  if  he  has  gone  so  far  as  to 
pay  the  bill  to  any  one  holding  it  under  such  forged  indorsement, 
he  may,  as  a  general  rule,  recover  back  the  amount.  So,  also,  if 
the  bill  has  been  altered  so  as  to  purport  to  bind  the  drawer  for  a 
larger  sum  or  in  a  different  manner  than  in  the  original  bill,  he 
will  not  be  bound  to  pay  the  bill.  And,  if  the  bill  is  paid,  he  may 
in  the  same  way  recover  back  the  money  paid  upon  it.^^ 

ACCEPTOR  SUPRA  PROTEST. 

72.  The  undertaking  of  the  acceptor  supra  protest  is  anal- 
ogous to  that  of  the  indorser. 

73.  To  consummate  the  liability  of  the  acceptor  supra 
protest,  it  is  necessary  to  take  three  steps: 

(a)  To  present  the   bill   at    maturity  to    the    original 

drarwee. 

(b)  Upon  refusal   of  the   original   drawee  to  pay,   to 

protest  for  nonpayment. 

(c)  To  present  the  bill  for  payment  to  the  acceptor  su- 

pra protest,  and,  on  his  refusal,  protest  it,  stat- 
ing the  foregoing  steps,  notice  of  which  must  be 
sent  to  the  drawer  and  indorsers. 

The  foregoing  doctrines  are  common  among  the  text  writers,  and 
are  probably  the  positions  which  would  be  taken  on  the  subject  by 
the  courts.  The  cases,  however,  involving  questions  of  such  accept- 
ances, are  not  many,  and  the  rules  relating  to  them,  therefore,  not 
established.  The  meaning  and  process  of  an  acceptance  supra  pro- 
test have  already  been  explained.^^  As  a  contract,  it  is  an  undertak- 
ing to  pay  if  the  original  drawee,  upon  a  presentment  to  him,  should 
persist  in  dishonoring  the  bill,  and  such  dishonor  by  him  be  notified 
by  protest  to  the  person  who  has  accepted  for  honor. -^     It  is  thus 

21  Holt  V.  Ross,  54  N.  Y.  479;  White  v.  Continental  Nat.  Bank,  64  N.  Y.  316. 

2  2  See  pages,  supra. 

2  3  Hoare  v.  Cazenove,  16  East,  391.  In  this  case  it  was  held  that  the  ac- 
ceptors of  a  foreign  bill  of  exchange,  who,  after  presentment  to  drawees  and 
refusal  to  accept,  and  protest  for  nonacceptance,  accept  the  same  for  the 


150  OF    THE    NATURE    OF    THE    1,1  ABILITIES    OF    THE    PARTIES.       [Ch.   5 

not  like  tlie  contract  of  the  acceptor, — an  absolute  engagement  to 
pay  at  all  events, — but  only  a  collateral  conditional  engagement  to 
pay  if  the  drawee  does  not  Hence  the  reason  of  the  giving  of  the 
acceptance  requires  a  second  resort  to  the  drawee  when  the  bill  is  in 
the  hands  of  the  holder  under  an  acceptance  supra  protest,  and  a 
further  protest  for  nonpayment  by  such  drawee.-*  It  might  happen 
that  in  the  meantime  effects  would  reach  the  drawee,  who  had 
refused  in  the  first  instance,  out  of  which  the  bill  may  and  would 
be  satisfied,  if  again  presented  to  the  drawee  when  the  period  of  pay- 
ment arrived.  "This  appears  to  me,"  said  Chief  Justice  Tenterden,^' 
'•to  be  a  very  sensible  interpretation  of  the  nature  of  acceptances  for 
honor  where  the  parties  say  nothing  on  the  subject.  It  is  equivalent 
to  saying  to  the  holder  of  the  bill:  'Keep  the  bill.  Don't  return  it. 
And  when  the  time  arrives  at  which  it  ought  to  be  paid,  if  it  be  not 
paid  by  the  party  on  whom  it  was  originally  drawn,  come  to  me,  and 
you  shall  have  the  money.' "  The  courts  thus  clothe  with  language 
and  interpret  the  intention  of  the  acceptor  supra  protest  in  giving 
an  acceptance  and  of  the  holder  in  receiving  it. 

U|jon  the  refusal  of  the  original  drawee  to  pay  the  bill  and  its  pro- 
test, it  may  or  may  not  be  paid  by  the  acceptor  for  honor.  If  it  is 
paid  by  him,  such  payment  may  be  made  for  the  honor  of  any  or  for 
the  honor  of  all  the  parties, — for  honor  generally,  as  this  last  method 
of  payment  is  termed.  But  unless  some  party  or  parties  are  speci- 
fied in  the  acceptance  supra  protest,  the  courts  construe  the  accept- 
ance as  made  for  the  honor  of  the  drawer.'^  Payments  of  this  kind 
do  not,  like  a  single  payment  by  the  original  drawee,  operate  as  a 
satisfaction  of  the  bill,  but  themselves  transfer  the  holder's  rights  to 
the  party  paying."  For  example,  if  the  payment  is  made  for  the 
hnnor  of  a  particular  indorser,  the  party  paying  may  sue  such  in- 
dorser  and  all  parties  prior  to  him  to  whom  he  could  have  resorted.*' 

honor  of  the  first  indorsers,  are  not  liable  on  such  acceptance  unless  there  has 
been  a  presentment  to  the  drawees  for  the  payment  and  a  protest  for  non- 
payment. 

24  Schofield  V.  Bayard,  3  Wend.  48S;   Lenox  v.  Leverett,  10  Mass.  1. 

2  8  Williams  v.  Germaine,  7  Bain.  &  C.  408. 

26  Chit.  Bills,  387. 

27  Smith  V.  Sawyer,  55  Me.  141;  Vandewall  v.  Tyn-ell,  1  Moody  &  M.  87. 

28  Mertens  v.  Winnington,  1  Esp.  112.  In  this  case  it  was  claimed  by  the 
defense  that,   \Yhere  a  bill  is  taken  up  for  the  honor  of  any  of  the  parties 


Ch.  5]  ACCEPTOR   SUPRA    PROTEST.  151 

If  he  pays  for  the  honor  of  the  bill  generally,  it  is  the  same  as  pay- 
ment for  honor  of  the  last  indorser,  and  he  may  recover  against  all 
parties  to  the  bill.-^  But  if  the  bill  is  not  paid  by  the  acceptor  supra 
protest,  then  the  rule  for  recovery  against  him  laid  down  by  Lord 
Tenterden  ^°  is  generally  applied,  and  the  reasons  for  it  accepted  as 
the  true  ones.  ''Whatever  is  requisite  to  enable  a  person  who  has 
accepted  a  bill  for  honor  of  another,  to  call  upon  that  person  to  repay 
him,  and  to  enable  him  to  recover  over  against  such  person,  may 
also  be  reasonably  held  necessary  to  enable  another  party  to  re- 
cover against  such  an  acceptor  for  honor.  For,  if  you  could  re- 
cover against  an  acceptor  for  honor  by  proof  of  less  than  will  en- 
able him  to  recover  against  the  party  for  whom  he  accepts,  there 
would  be  an  inconsistency.  For  it  might  be  said  with  some  reason 
that,  if  the  acceptor  for  honor  chose  to  pay  without  requiring  all  the 
proof  from  the  holder  which  would  be  necessary  for  him  to  recover 
upon,  the  payment  would  be  made  in  his  own  wrong,  and  he  would 
not  be  entitled  to  recover  over.  It  seems,  therefore,  that  the  same 
rule  as  to  proof  which  prevails  in  the  case  of  an  acceptor  for  honor 
in  suing  the  party  for  whose  honor  he  accepts,  must  also  be  observed 
when  the  holder  of  a  bill  sues  the  person  so  accepting."  This  means, 
if  we  may  be  pardoned  in  amplifying  the  words  of  so  great  a  judge, 
that,  in  prosecuting  the  acceptor  supra  protest,  the  steps  are  each 
to  be  demonstrated  which  fix  the  rights  and  liabilities  of  the  parties. 
In  the  first  place  it  is  necessary  to  show  the  right  of  the  acceptor 
supra  protest  to  so  accept.  This  is  shown  by  pleading  and  proving  if 
such  be  the  case  that  the  bill  was  first  presented  to  the  drawee  for 
acceptance,  but  that  its  acceptance  was  refused  and  that  thereupon, 

whose  names  are  on  it,  only  such  person  is  liable.  It  was  held  that,  in  such 
case,  the  party  so  taking  up  the  bill  may  be  considered  as  an  indorsee  pay- 
ing full  value,  and  consequently  entitled  to  all  remedies  which  an  indorsee  is 
entitled  to,  and  to  sue  all  parties  to  the  bill. 

29  Fairley  v.  Roch,  Lutw.  891.  In  Ex  parte  Lambert  it  was  held  that  where 
a  bill,  accepted,  being  dishonored,  is  taken  up  for  the  honor  of  the  drawer  by 
the  petitioner,  the  latter  has  a  clear  right  as  against  the  drawer.  He  has  a 
right  to  stand  in  the  place  of  the  drawer;  but  he  cannot  make  a  title  stronger 
than  that  of  the  drawer,  thus  ousting  the  assignees  of  the  bankrupts  of  the 
defense  which  they  would  have  against  him.  13  Ves.  179;  Ex  parte  Wyld, 
30  Law  J.  Bank.  10. 

80  Williams  v.  Germaine,  7  Barn.  &  C.  408. 


15'2  OF   THE    NATURE    OF   THE    LIABILITIES    OF    THE    PARTIES.       [Ch.  5 

the  bill  being  protested,  the  acceptance  supra  protest  was  made. 
The  contract  of  the  holder  at  this  juncture  is  construed  to  be  that  he 
and  subsequent  parties  have  a  right  to  collect  the  bill  of  the  ac- 
ceptor supra  protest,  provided  the  bill  is  not  paid  when  due  by  the 
drawee, — the  legal  situation  of  the  prior  parties  remaining  unchan- 
ged until  the  liabilities  and  rights  under  the  instrument  are  finally 
fixed  at  the  time  of  the  presentation  of  the  instrument  for  payment. 
At  this  time  the  holder  who  has  obtained  the  acceptance  supra  pro- 
test, or  subsequent  holders,  for  the  reasons  we  have  given,  must  pre- 
sent the  instrument  for  payment  to  the  drawee,  and  if  payment  is 
refused  again  protest  it  and  then  present  it  to  the  acceptor  supra 
protest  for  payment.  At  this  juncture  the  rights  of  the  parties  are 
that  the  holder  who  obtained  the  acceptance  supra  protest  and  all 
parties  subsequent  to  him  have  the  right  to  enforce  payment  against 
the  acceptor  supra  protest  upon  pleading  and  proving  the  foregoing 
facts  of  the  first  and  second  presentment,  protest  and  notice,  and 
also  the  foregoing  fact  of  notice  to  all  parties  for  whose  honor  the 
acceptor  supra  protest  has  accepted.^ ^  It  is  probably  the  doctrine 
that  they  may  also  enforce  the  bill  against  parties  prior  to  the  time 
of  the  acceptance  supra  protest  upon  the  foregoing  fact  of  the  pro- 
test for  non-acceptance.  The  acceptor  supra  protest,  if  he  pays  the 
bill,  whether  by  virtue  of  legal  process  or  otherwise,  is  then  not  only 
subrogated  to  the  rights  of  parties  to  the  bill  whom  he  pays,  but  also 
may  recover  both  from  the  parties  for  whose  honor  he  has  accepted, 
and  from  all  parties  antecedent  to  them,  all  damages  he  may  have 
incurred  by  reason  of  his  acceptance.  But  to  do  so  he  must  plead 
and  prove  all  the  facts  upon  which  his  liability  rests.^^  There  seems 
to  be  no  reason  from  the  equities  of  the  case  why  the  acceptor  supra 
protest  should  not  be  subject  to  the  estoppels  which  are  implied  in 
the  acceptance  of  an  ordinary  acceptor.  And  although  there  is  con- 
flicting authority  it  has  been  held  that  they  are  the  same.^^  He 
intends  to  assume  by  his  act  the  liability  of  an  acceptor,  and  his  lia- 

81  Baring  v.  Clark,  19  Pick.  (Mass.)  220;  Gazzam  v.  Armstrong,  3  Dana,  554; 
Wood  V.  Pugh,  7  Ohio,  pi.  2,  p.  156. 

8  2  Scliofield  V.  Bayard,  3  AVend.  491;  Ex  parte  Wackerbarth,  5  Ves.  574; 
Hoare  v.  Cazenove,  IG  East,  391;   Byles,  Bills,  pp.  2G7,  271. 

83  Goddard  v.  Merchants'  Bank,  4  N.  Y.  147;  Salt  Springs  Bank  v.  Syra- 
cuse Savings  Inst.,  62  Barb.  101.    See,  contra.  Wilkinson  v.  Johnson,  3  Barn. 


Ch.   5]  DRAWER    AND    INDORSER.  153 

bility  would  probably  be  held  by  the  courts  to  be  the  same  were 
questions  of  this  character  often  coming  before  them  for  decision. 
But  the  rule  thus  laid  down  has  been  but  little  discussed  and  this 
enunciation  of  them  therefore  is  rather  speculative  than  positive. 

DRAWER  AND  INDORSER. 

74.  Every  drawer  promises  the  payee  and  subsequent 
holders,  and  every  indorser  promises  his  indorsee  and  sub- 
sequent holders,  that  if  the  bill  or  note  is  presented  for 
payment  to  the  drawee,  acceptor,  or  maker,  and  payment 
demanded  and  refused,  and  the  bill  or  note  is  protested, 
and  due  notice  of  these  facts  is  sent  to  him,  he  will  in- 
demnify the  holder  for  loss. 

75.  The  drawer  of  a  bill  of  exchange  promises  the  payee 
and  subsequent  holders,  and  the  indorsers  before  accept- 
ance promise  subsequent  holders,  that  if  on  due  present- 
ment the  bill  be  not  accepted,  and  due  notice  of  that  fact 
be  given,  he  w^ill  indemnify  them  for  loss.** 

76.  The  liability  of  the  drawer  and  of  each  indorser  is 
several  from  that  of  all  the  other  parties  to  the  instrument. 

In  the  chapter  relating  to  "Indorsement"  the  student  was  intro- 
duced to  two  of  the  ideas  embodied  in  the  principal  text.  The  first 
was  that  an  indorsement  was  a  contract  separate  and  apart  from 
that  evidenced  by  the  terms  set  forth  on  the  face  of  the  paper.  The 
second  was  that  in  addition  to  these  terms  so  set  forth  it  was  a  con-, 
tract  in  which  the  law  itself  implied  others  equally  important^'' 
The  terms  last  spoken  of  consist  of  certain  conditions  precedent 
to  the  right  of  its  enforcement  as  a  contract  of  indemnity,  which 
were  presentment  for  acceptance  to  the  drawee  or  for  payment 
either  to  the  acceptor  of  the  bill  or  the  maker  of  the  note,  and  in 
case  of  its  dishonor  then  that  due  notice  of  that  fact  should  be  given 

&  C.  428.    But  see  Phillips  v.  Thurn,  L.  R.  1  C.  P.  463,  holding  that  it 

admits  the  drawer's  signature  alone.    18  C.  B.  694. 

8  4  These  propositions  are  adopted  from  Ames,  Bills  &  N.  p.  817. 

80  See,  also,  Castrique  v.  -Buttigieg,  10  Moore,  P.  C.  Cas.  94. 


154  OF    THE    .SATIRE    OK    THE    LIABIMTIES    OF    TIIK    PAiniKS.        [Ch.   5 

tfie  indorser.  In  the  chapter  iclatiug  to  "Acceptance,"  and  in  a 
foregoing  section  of  this  chapter,  the  student  was  further  intro- 
duced to  the  idea  that  the  liability  of  the  drawer  is  a  shifting  one. 
Before  acceptance  he  is  the  party  primarily  liable;  after  acceptance 
he  is  the  party  secondarily  liable,  his  position  being  that  substan- 
tially of  an  indorser,  and  subject  to  the  rules  we  have  just  stated. 
In  a  later  section  of  this  work  we  shall  show  that  presentment  for  ac- 
ceptance by  a  holder  is  not  vital  to  the  life  of  his  various  contracts 
with  the  other  parties  to  the  bill.  It  is  only  for  his  better  security. 
And  although  the  holder  of  a  bill,  by  its  nonacceptance,  may  acquire 
a  right  of  action  against  the  drawer  and  indorsers  prior  to  himself, 
it  is  not  absolutely  necessary  for  him  to  do  so.^*  These  facts  being 
explained,  it  leaves  little  to  be  said  about  the  principal  text  In 
fact,  the  principal  text  is  set  out  mainly  that  the  student  may  fix 
its  statements  in  mind  by  w^ay  of  contrast  to  the  contract  of  the 
maker  and  acceptor. 

There  are,  however,  two  points  to  be  noticed.  They  are  that  the 
liability  of  the  drawer  and  indorser  are  in  most  respects  identical, 
and  that  their  liability  is  severaJ.  "There  is  no  distinguishing  the 
case  of  an  indorser  from  that  of  the  drawer,"  said  Lord  EUenbor 
ough,^^  "it  having  been  long  ago  decided  that  every  indorser  is  in 
the  nature  of  a  new  drawer,  every  indorsement  as  a  new  bill,  and 
that  the  indorser  stands  to  his  indorsee  in  the  law  merchant  the 
same  as  the  drawer."  With  both  drawer  and  indorser  a  distinct 
bill  is  drawn.  With  the  drawer,  the  contract  is  between  himself 
and  the  payee;  with  the  indorser,  betw^een  himself  and  his  indorsee, 
the  indorser  standing  in  the  place  of  the  drawer,  the  remedy  of  the 
indorsee  being  first  against  his  immediate  indorser  and  then  against 
the  original  drawer  as  the  assignee  and  standing  in  the  place  of  the 
indorser.  In  this  respect  the  case  of  the  promissory  note  when  once 
indorsed  and  the  bill  of  exchange  are  parallel.  In  the  case  of  the 
promissory  note  before  indorsement  the  contract  is  only  a  promise 
to  pay,  but  after  indorsement  it  becomes  an  order  by  the  indorser 
upon  the  maker  of  the  note  to  pay  the  debt  of  the  maker  transferred 

36  Walker  v.  Stetson,  19  Ohio  St.  400,  Johns.  Cas.  Bills  &  N.  89;  Cashman  t. 
Harrison,  90  Cal.  297,  27  Pac.  283;  Id.,  Johns.  Cas.  Bills  &  N.  104. 
87  Ballingalls  v.  Gloster,  3  East,  481. 


Ch.   -5]  DRAWER    AND    INDORSER.  155 

to  indorser,  and  again  by  him  as  indorser  transferred  to  his  in- 
dorsee. 

The  difference  between  the  bill  and  the  note  is  therefore  one  but 
of  words,  the  indorser  of  a  promissory  note  being  almost  the  same 
as  the  drawer  of  the  bill  of  exchange.^*  It  is  partly  this  reason 
and  partly  the  business  one  that  the  drawer  and  indorser  may  pro- 
tect themselves,  the  drawer  by  withdrawing  his  effects  from  the 
hands  of  the  acceptor,  the  indorser  by  taking  steps  against  parties 
prior  to  him,  that  are  the  foundations  of  the  rule  that  both  drawer 
and  indorser  are  entitled  to  the  prior  presentment  and  protest  and 
notice.^^  It  is  also  the  reason  of  the  estoppels  discussed  in  the 
next  succeeding  sections  applying  to  drawer  and  indorser  alike. 
And  it  may  be  stated  generally,  and  the  student  must  fix  it  in  his 
mind,  that  the  doctrines  of  the  contract  of  the  drawer  are  the  doc- 
trines of  the  contract  of  the  indorser,  because  they  are,  in  their 
legal  effect,  one. 

The  second  point  to  be  fixed  in  the  mind  is  the  character  of  the 
contract  of  the  drawer  and  of  each  indorser  as  several  from  that  of 

8  8  Heylyn  v.  Adamson,  2  Burrows,  G69.  In  this  case  it  was  held  "that  in 
actions  upon  inland  bills  of  exchange,  by  an  indorsee  against  an  indorser, 
the  plaintiff  must  prove  a  demand  of,  or  due  diligence  to  get  the  money  from, 
the  drawee  (or  acceptor),  but  need  not  prove  any  demand  of  the  drawer;  and 
that,  in  actions  upon  promissory  notes  by  an  indorsee  against  the  indorser, 
the  plaintiff  must  prove  a  demand  of,  or  due  diligence  to  get  the  money  from, 
the  maker  of  the  note." 

3  9  Blesard  v.  Hirst.  5  Burrows,  2G70.  This  was  a  case  where  an  inland 
bill  made  payable  to  one,  and  by  him  indorsed  to  a  third  party  who  tenders 
it  for  acceptance  and  is  refused,  and  who  then  kept  it  for  some  time  without 
giving  notice  of  the  refusal.  It  was  held  that  the  third  party  should  have 
given  notice,  and  that  by  failing  to  do  so,  he  took  the  risk  upon  himself  as  the 
Indorser  of  the  bill  was  imposed  upon.  The  one  guilty  of  the  negligence 
should  suffer  for  it.  In  the  case  of  Collott  v.  Haigh,  a  bill  drawn  by  de- 
fendant upon  J.  D.  and  accepted  by  him  for  defendants'  accommodation, 
was  indorsed  to  plaintiffs.  Upon  maturity,  time  was  given  to  J.  D.  in  con- 
sideration of  his  giving  security  to  plaintiffs,  which  security  proved  not  to 
be  available.  It  was  held  that  such  granting  of  time  to  the  acceptor  did  not 
discharge  the  defendant,  and  he  cannot  defend  himself  on  that  ground,  or 
for  want  of  notice,  as  the  bill  was  for  his  accommodation,  3  Camp.  281. 
Gale  V.  Walsh,  5  Term  R.  239;  Aniba  v.  Yeomans,  39  Mich.  171;  Newberry 
V.  Trowbridge,  13  Mich.  2G3. 


156  OF    THE    NATURK    OF    THK    LIABILITIES    OF    THE    PARTIES.       [Ch.    5 

every  other  party  to  the  contract.  It  naturally  follows  that,  so 
long  as  the  promise  of  the  drawer  and  indorser  is  a  separate  and  in- 
dependent one,  it  must  always  be  separate  in  the  liability  incurred 
under  it.  The  indorsee  enters  into  a  contract  with  his  immediate 
party  from  whom  he  got  the  bill  and  who  indorsed  it  to  him.  Every 
prior  indorser  on  the  bill,  by  virtue  of  his  indorsement,  makes  a 
promise  to  each  new  indorsee.  If  A,  B,  C,  and  D  are  indorsers  on 
a  negotiable  instrument,  A  makes  separate  promises  to  do  certain 
things  with  B,  C,  and  D;  B  with  C  and  D;  and  so  on.  Each  makes 
a  separate  promise  with  every  individual  who  comes  after  him  on 
the  instrument.  The  liability  of  each  indorser  is  in  legal  phrase 
several  from  that  of  all  other  parties  to  the  instrument.  Under  the 
old  common-law  rule  this  meant  that  the  holder  might  sue  the 
parties  to  the  instrument  one  at  a  time,  or  he  might  sue  separate 
indorsers  in  separate  actions  at  the  same  time.  But  if  any  one  of 
these  indorsers  thus  sued  should  pay  the  instrument  the  claim  of 
the  holder  against  each  upon  it  was  satisfied.*"  It  may  have  meant 
that  the  holder  might  enforce  his  claim  against  all  parties  at  once, 
though  he  could  not  sue  some  of  them,  omitting  to  sue  others.  But 
this  last  proposition,  strictly  speaking,  is  the  enforcement  of  a  joint 
and  several  liability,  and  for  it  there  seems  to  be  but  little  authority 
except  its  practicability.  But,  whatever  the  former  rule  may  have 
been,  it  is  now  generally  settled  by  statute  throughout  the  Union 
that  one  or  any  or  all  the  parties  to  the  instrument  may  be  sued 
upon  their  several  liability  at  one  time  or  at  separate  times, 

WARRANTIES  OR  FACTS  WHICH  THE  DRAWER  IS 
ESTOPPED  TO  DENY. 

77.  The  dra^wer   of  a  bill  before  acceptance  undertakes 
with  the  payee  and  subsequent  holders: 

(a)  That  there  is  a  drawee,  and  that  he  is  capable  of 

accepting. 

(b)  That  he  will  accept. 

When  the  drawer  issues  a  bill  to  the  world,  he  undertakes  two 
things.     One  is  that  the   situation,   nature,  or  character  of  the 

4  0  Chit.  Bills,  538,  539;    Daniel,  Neg.  Inst.  §  1203. 


Ch.    5]  WAKKANTIES    OF    THE    DRAWER.  157 

drawee  is  such  that  the  bill  can  be  accepted;  and  the  other  is  that  the 
drawee,  upon  presentment,  will  accept  the  bill.  The  legal  interpre- 
tation of  the  words  on  the  face  of  the  bill  indicating  the  place  of 
presentment  to  the  drawee,  as,  "To  John  Smith,  at  Baring  Bros.," 
is  that  the  drawer  contracts  that  the  drawee  may  be  found  at  that 
place,  and  the  bill  presented  to  him  there.* ^  Thus,  in  case  of  a 
bill  *^  drawn  on  Paris,  where  the  French  directory,  for  public  rea- 
sons, forbade  its  acceptance,  the  court  so  applied  the  rule  that  ul- 
timately the  loss  should  not  fall  upon  the  payee  or  indorser,  but 
upon  the  drawer  who  issued  the  bill,  who,  it  is  to  be  inferred,  was 
deemed  to  warrant  that  the  situation  of  affairs  would  be  such  that 
the  bill  could  be  presented  for  acceptance.  If  this  turned  out  not 
to  be  the  case,  then  the  drawer  must  bear  the  loss.  This  loss  to 
be  borne  by  him  consists  of  all  loss  incurred,  such  as  re-exchange, 
notarial  expenses,  and  other  damage  *^  necessarily  incidental  to 
the  failure  to  obtain  the  acceptance,  because  the  party  taking  the 
bill  was  obliged  to  make  these  expenditures  to  collect  the  bill,  and 
if  the  drawer's  contract  was  broken,  and  such  collection  failed, 
the  drawer  must  reimburse  such  party.**  The  holder  of  a  bill, 
whom  it  reaches,  in  the  course  of  its  circulation,  may  present  the 

41  Edw.  Neg.  Inst.  §  530;   Wing  v.  Terry,  5  Hill  (N.  Y.)  160. 

*2  Mellisb  V.  Simeon,  2  H.  Bl.  378. 

43  Auriol  V.  Thomas,  2  Term  R.  52.  In  this  case  a  bill  of  exchange,  2,800 
star  pagodas,  payable  to  defendant  or  order,  and  directed  to  G.  M.  Madras, 
was  indorsed  to  plaintiffs,  who  discounted  it  at  the  rate  of  exchange,  6s.  6d. 
per  pagoda.  On  sending  the  bill  to  Madras  it  was  returned  protested  for 
nonacceptance  and  nonpayment.  The  plaintiffs  recovered  10s.  per  pagoda 
and  £5  per  cent,  after  end  of  30  days'  notice  to  defendant.  Such  recovery 
was  held  not  usurious,  as  it  was  proved  to  be  the  usual  custom  in  case  of 
such  bills,  as  such  recovery  included  charges  of  remission  and  other  inci- 
dental expenses  as  well  as  legal  interest  In  Gantt  v.  Mackenzie,  a  bill  of 
exchange  was  presented  for  acceptance  and  refused,  April  17,  1809,  and  was 
presented  for  payment  on  the  19th  of  June  of  the  same  year.  It  was  decided 
that  the  holder  was  entitled  to  £10  per  cent  as  damages,  and  interest  was  to 
be  allowed  from  the  time  of  presentation  for  payment.  3  Camp.  51.  In  Mel- 
lisb V.  Simeon,  it  was  held  that  where  the  holder  has  been  guilty  of  no  de- 
fault, the  drawer  is  answerable  for  the  amount  of  the  bill,  and  also  for  the 
re-exchange  which  is  a  consequence  of  the  bill  not  being  paid.     2  H.  Bl.  378. 

4  4  Byles,  Bills,  402;  Daniel.  Neg.  Inst  §  4445;  and  Weldon  v.  Buck.  1 
Johns.  444. 


158  OF    THE    NATURE    OF    THE    LIABILITIES    OF    THE    PARTIES.       [Cll.  5 

bill  to  the  drawee;  and,  if  he  refuses  to  accept,  although  the  bill 
is  not  due,  the  holder  may  at  once  turn  and  hold  the  drawer,  in- 
dorsers,  and  all  parties  upon  the  bill  prior  to  himself.  The  reason 
of  this  is  to  guaranty  the  circulation  of  bills,  by  preventing  the 
drawer  from  withdrawing  funds  from  the  hands  of  the  drawee  be- 
fore the  bill  is  presented,  and  also  to  assure  the  holder  that,  if  any- 
thing is  wrong  between  the  drawer  and  di-awee,  and  the  drawee  re- 
fuses to  accept,  he  may  at  once  turn  for  reimbursement  to  the  par- 
ties through  whom  the  bill  has  been  circulated,  and  who  treated  it 
as  the  equivalent  of  cash,  and  were  paid  money,  each  in  turn,  for 
it.**  The  further  effect  of  this  rule  will  be  considered  in  the  chap- 
ter on  "Presentment." 

The  courts  speak  of  this  legal  relation  of  the  drawer  as  a  stipu- 
lation or  part  of  the  contract  rather  than  as  an  estoppel.  This 
is  because  the  reason  of  the  rule  is  somewhat  different  from  that 
which  is  the  basis  of  the  estoppels  of  the  acceptor.  It  is  argued 
that  the  main  purpose  of  the  contract  between  the  drawer,  on  the 
one  hand,  and  the  payee  and  person  to  whom  he  transfers  his  rights, 
on  the  other,  is  to  remit  money.  For  this  purpose  the  payee  and 
subsequent  holders  pay  valuable  consideration.  To  effect  this  pur- 
pose, the  drawer,  on  his  part,  agrees  that  the  money  shall  be  paid 
at  the  time,  place,  and  by  the  person  nominated  in  the  bill.  Of 
the  very  essence  of  this  agreement,  therefore,  is  the  fact  that  the 
drawee,  who  may  be  a  stranger  to  the  payee  or  subsequent  holder, 
should  be  found  in  the  place  where  he  is  described  to  be.*°  Other- 
wise, it  would  be  the  duty  of  the  holder  to  search  the  world  over 
for  the  person  to  pay  him  in  turn  the  money  he  had  paid  the  drawer. 
It  is  also  of  its  essential  nature  that  the  drawee  shall  have  funds  in 
his  hand  to  warrant  his  accepting,  or  that  he  accepts  from  some 
other  consideration,  immaterial  to  the  payee,  perhaps,  but  good  as 

4B  Ballingalls  v.  Gloster,  3  East,  481;  Mason  v.  Franklin.  3  Johns.  202; 
Weldon  v.  Buck,  4  Johns.  144;  Miller  v.  Hackley,  5  Johns.  375;  Bank  of 
Rochester  v.  Gray,  2  Hill,  227. 

4  8  De  Wolf  V.  Murray,  2  Sandf.  1G6;  Hine  v.  Allely,  4  Barn.  &  AdoL  024. 
In  this  case  an  accepted  bill  was  presented  at  the  place  of  payment  specified 
in  the  instrument,  but  the  house  was  closed.  It  was  objected  that  for  this 
reason  there  had  been  no  presentment,  but  it  was  held  that  the  presentment 
as  described  was  good.  Buxton  v.  Jones,  1  Man.  «S:  G.  S3;  Pierce  v.  Sti'uthers, 
27  ra.  St.  249. 


Ch.  5]  WARRANTIES    OF  THE    INDORSER.  159 

between  the  drawer  and  drawee.  In  other  words,  as  between  the 
drawer  and  payee,  the  drawee,  though  he  is  designated  as  the  per- 
son to  make  the  payment,  is  a  mere  agent  of  the  drawer;  and  the 
latter,  therefore,  since  he  undertakes  for  his  agent's  acts,  "under- 
takes that  the  acceptance  be  made  at  all  events."  *^ 


WARRANTIES  OR  FACTS  WHICH  THE  INDORSER  IS 
ESTOPPED  TO  DENY. 

78.  The  indorser  of  a  bill  or  note  is  estopped  from  de- 
nying, and  warrants  to  his  indorsee  and  to  all  subsequent 
holders: 

(a)  That  the  bill  or  note  will  be  accepted  and  paid. 

(b)  That  the  bill  or  note  is,  in  every  respect  and  as  to 

all  prior   parties,   genuine,   and    neither   forged, 
fictitious,  nor  altered. 

(c)  That  the  bill  or  note  is  a  valid  and  subsisting  ob- 

ligation, and  that  the  contract  obligations  of  all 
prior  parties  are  valid. 

(d)  That    the    prior    parties  were    competent  to  bind 

themselves,  whether  as  draw^er,  acceptor,  maker, 
or  indorser. 

(e)  That  he,  as  indorser,  has  a  lawful  title  to  the  bill 

or  note,  and  also  a  right  to  transfer  it. 

It  is  interesting  to  notice  that  the  double  relation  of  the  indorser, 
as  a  transferror  of  title  and  the  maker  of  a  distinct  contract  em- 
bodying certain  warranties  as  a  part  of  its  stipulations,  is  found  in 
the  earliest  development  of  the  theories  of  commercial  paper.*^  As 
early  as  the  year  1700  Lord  Holt  admitted  without  question  the  idea 
that  an  indorser  was  a  transferror  of  title.  And,  further,  in  answer  to 
the  argument  that  if  the  payee  and  indorser  of  a  bill  were  one  and 
the  same  person  the  indorser  was  merely  a  transferror,  his  lordship 
replied  that  the  law  at  that  day  was  that  an  indorsement  was  a 

♦7  Hibernia  Nat.  Bank  v.  Lacombe.  84  N.  Y.  3G7.' 
*»  Rank  of  England  v.  Newman,  Ld.  Raym.  442. 


160  OF    THE    NATURE    OF    THE    LIABILITIES    OF    THE    PARTIES.        [Cll.   5 

conditional  warranty  and  made  a  new  contract.*®  And  150  years 
later  an  English  judge  equally  distinguished,  speaking  of  this  doc- 
trine of  warranty  thus  promulgated  by  Lord  Holt,  said  "it  was  es- 
tablished by  a  long  string  of  authorities."  ^°  Its  reason  is  that,  if 
the  contract  of  indemnity  of  the  indorser  is  to  the  effect  that  if  the 
party  promising  or  requested  to  pay  the  amount  specified  in  the 
instrument  does  not  pay  he  (the  indorser)  will,itfrom  its  very  nature 
presupposes  that  he  also  promises  that  he  will  not  raise  as  a  de- 
fense any  of  the  facts  we  are  about  to  mention.  Business  faith 
would  not  allow  him  to  have  in  mind  the  intention  to  raise  these 
defenses  and  yet  promise  indemnity  at  the  same  time.  And  there- 
fore the  first  reason  of  the  estoppels  or  warranties  of  the  indorser 
is  that  he  is  excluded  from  setting  up  certain  facts  of  defense  be- 
cause these  facts  are  wholly  inconsistent  with  his  promise  of  in- 
demnity. 

A  clear  idea  of  this  doctrine,  treated  as  one  of  warranty,  can  be 
obtained  by  comparing  it  to  other  classes  of  property.  Just  as 
the  vendor  of  chattels  or  of  real  estate  warrants  certain  things  to  be 
true  of  the  property  that  he  sells,  so  the  indorser  of  a  bill  or  note, 
by  discounting  it  at  a  bank,  or  offering  it  in  payment  for  goods  sold, 
or  circulating  it  in  any  way,  guaranties  or  warrants  that  certain 
facts  are  true  of  the  instrument."^  And  when  the  maker  of  a  note 
or  acceptor  of  a  bill  refuses  to  pay  it,  on  the  ground  that  it  is  forged 
or  altered  or  usurious,  or  that  the  parties  were  infants,  or  that  the 
bill  had  been  stolen,  the  bank  who  has  taken  it,  or  the  party  who  has 
accepted  it  in  payment  for  goods,  turns  upon  the  indorser  who  trans- 

*9  Lambert  v.  Oakes,  1  Ld.  Raym.  443.  This  case  also  held  that  if  the  in- 
dorsee does  not  demand  the  money  payable  by  the  bill  of  the  person  upon 
whom  it  is  drawn  in  convenient  time  and  he  afterwards  fails,  the  indorser  is 
not  liable. 

60  Campbell,  C.  J.,  in  MacGregor  v.  Rhodes,  6  El.  &  Bl.  268. 

Bi  The  indorser  of  a  bill  of  exchange  undertakes  that  the  drawee  will  pay 
it,  if  the  holder  present  it  to  him  at  maturity  and  demand  payment;  and  if 
he  refuse  to  pay  it,  and  the  holder  cause  it  to  be  protested,  and  due  notice  to 
be  given  to  the  indorser,  then  he  promises  to  pay  it.  All  these  conditions 
enter  into  and  make  part  of  the  contract  between  the  parties  to  a  foreign  bill 
of  exchange;  and  the  law  imposes  the  performance  of  them  upon  the  holder, 
as  conditions  precedent  to  the  liability  of  the  indorser  of  the  bill.  McKinley, 
J„  in  Musson  v.  Lake,  4  How.  (U.  S.)  2G2. 


Ch.   5]  WARRANTIES    OF    THE    INDORSER.  161 

ferred  it  to  him,  and  sues  him  upon  his  indorsement.  And,  when 
the  indorse!'  sets  up  any  of  these  facts  by  way  of  defense,  the  holder 
answers,  "I  am  suing  you  upon  a  separate  contract  in  which  you 
warranted  these  things  to  me,"  and  the  courts  conclude  the  indorser 
from  such  a  defense. 

The  warranty  is  thus  implied  in  an  indorsement  partly  because  of 
the  nature  of  the  promise  of  an  indorser  and  partly  because  the 
transfer  of  the  paper  by  indorsement  is  something  in  the  nature  of 
a  sale.  And  thus  we  find  that  some  of  the  warranties  extend  not 
only  to  paper  actually  indorsed  by  one  person  to  another  but  also 
to  paper  transferred  by  delivery  by  one  person  to  another  without 
indorsement.  And  at  the  risk  of  some  confusion  in  the  student's 
mind  we  desire  to  classify  the  warranties  against  defenses  as  those 
which  apply  to  a  sale  by  mere  delivery  and  those  which  apply  to 
a  sale  accompanied  by  indorsement.  A  transferror  by  delivery 
warrants  the  genuineness  of  the  signatures;  ^^  that  the  title  is  what 
it  purports  to  be,^^  that  the  paper  is  of  the  kind  and  description 
that  it  purports  to  be,^*  that  he  has  no  knowledge  of  any  facts  that 
prove  the  paper  to  be  worthless;  ^^  and  that  the  transferror  has  done 
nothing  to  prevent  the  transferee  from  collecting  the  paper.^^  The 
reason  given  in  case  of  forged  paper  is  that  it  is  nothing;  that  the 
transferror  has  given  nothing  for  the  original  consideration;  and 
that,  therefore,  the  bill  or  note  may  be  rejected,  and  he  may  be  sued 
upon  the  original  consideration.  But  the  reason,  as  given  by  the 
courts  of  New  York,  in  all  cases  other  than  those  where  the  war- 
ranty is  of  title,  and  that  the  instrument  is  genuine,  and  not  forged, 
is  that  the  implied  warranty  is  based  upon  a  scienter.  By  this  is 
meant  that  the  implied  warranty,  when  the  bill  or  note  is  trans- 
ferred by  delivery,  is  upheld  by  the  general  principle  of  sales, — that 
whenever  an  article  sold  has  some  latent  defect,  which  is  known  to  the 
seller  and  hot  to  the  purchaser,  the  former  is  liable  for  this  defect,  if 

82  Frank  v.  Lanier,  91  N.  T.  112;  Bell  v.  Dagg,  GO  N.  Y.  528. 

B3  Mun-ay  v.  Judah,  6  Cow.  483;  Herrick  v.  Whitney,  15  Johns.  240;  Shaver 
V.  Ehle,  16  Johns.  201. 

B4  Whitney  v.  National  Bank  of  Potsdam,  45  N.  Y.  ;;03;  Fenu  v.  Harrison, 
B  Term  R.  757;  Gurney  v.  Womersley,  4  El.  &  Bl.  133. 

65  Brown  v.  Montgomery,  20  N.  Y.  287. 

66  Edw.  Neg.  Inst.  §  355. 

NEC.  BILLS — 11 


162  OF    THE    NATURE    OF    THE    LIABILITIES    OF    THE    PARTIES.       [Ch.  t) 

he  fails  to  discover  his  knowledge  on  the  subject  at  the  time  of  the 
sale.  The  courts,  rather  vaguely,  it  seems,  say  that,  where  knowl- 
edge is  proved  by  direct  evidence,  the  resi)onsibility  rests  on  the 
ground  of  fraud.  Where  the  probability  of  knowledge  is  so  strong 
that  courts  will  presume  the  existence  without  proofs,  the  vendor  is 
held  responsible  upon  an  implied  warranty.  The  difference  be- 
tween the  cases  is  that  in  the  one  the  scienter  is  actually  proved, 
in  the  other,  presumed.  Without  knowledge  of  some  sort  in  casee 
of  instruments  transferred  by  delivery,  there  is  no  warranty."  The 
language  of  the  decisions  summarized  is  that,  where  the  maker  or 
acceptor  will  not  pay  the  note  or  bill  for  any  other  reason  than 
forgery,  then  the  transferror  by  delivery  without  indorsement  is 
not  liable  for  the  defect  in  the  instrument  which  prevents  recovery 
upon  it,  unless  he  knew  of,  or  can  be  presumed  to  have  known  of,  that 
defect.  If  he  knew  of  it,  then  the  transfer  was  a  fraud,  and  the 
transferror  is  liable  in  an  action  for  deceit.  If  he  can  be  presumed 
to  have  know'n  it,  then  a  warranty  is  implied  upon  which  the  trans- 
ferror is  liable.  The  student  must  keep  in  mind  that  this  rule  and 
these  reasons  have  been  explicitly  enunciated  only  in  New  York."^® 
And  all  that  can  be  said  of  it  as  a  rule  of  general  application  is  that 
tlie  reasons  for  its  being  may  possibly  lead  to  its  adoption  in  other 
jurisdictions.  It  seems  to  be  the  doctrine  of  the  federal  courts,*" 
and  it  is  likely  that  it  prevails  in  England.^"  But  it  is  controverted 
by  text  writers  of  great  authority,''^  but  not,  as  it  would  seem,  up- 
on grounds  entirely  consistent  with  the  theory  of  contract  For, 
while  they  admit  as  unquestioned  law  that  any  ordinary  warranty 
of  a  bill  or  note  may  be  excluded  by  express  agreement  of  the  trans- 
ferror and  transferee,®''  it  is  submitted  they  do  not  give  to  the 

57  Littauer  v.  Goldman,  72  N.  Y.  506. 

6  8  Littauer  v.  Goldman,  72  N.  Y.  506;  Edw.  Bills  &  N.  §  355;  Mandeville  v. 
Newton,  119  N.  Y.  13,  23  N.  E.  920;  Meridian  Nat.  Bank  v.  Gallaudet,  13  N, 
Y.  St.  Rep.  269. 

5  9  Otis  V.  CuUum,  92  U.  S.  448. 

60  Chit  Bills,  p.  247;  Fenn  v.  Han-ison,  3  Durn.  &  E.  (3  Term  R.)  757; 
Lambert  v.  Heath,  15  Mees.  &  W.  485;  Hall  v.  Conder,  26  Law  J.  C.  P.  138; 
Camidge  v.  Allenby,  6  Barn.  &  C.  373. 

61  Tied.  Com.  Taper,  §  244;  Rand.  Com.  Paper,  §  757;  Daniel,  Neg.  Inst 
§  733. 

62  Bell  V.  Dagg,  60  N.  Y.  528, 


Ch.  5]  WARRANTIES    OF    THE    INDORSER.  163 

fact  of  failing  to  indorse  at  all  its  reasonable  intendment.  It  would 
seem  to  mean,  if  it  meant  anything,  an  intention  to  sell  the  paper 
as  it  stood,  good,  bad,  or  indifferent.  If  the  seller  did  not  indorse, 
he  evidently"  did  not  intend  to  make  the  contract  usually  construed 
from  an  indorsement.  If  the  purchaser  did  not  ask  the  seller  ei- 
ther to  indorse,  or  any  questions  concerning  the  character  of  the 
paper,  or  the  seller  did  not  make  to  the  purchaser  any  representa- 
tions which  would  be  valid  as  an  express  warranty  on  the  seller's 
part,^^  then  the  reasonable  construction  of  this  silence  would  be 
that  there  was  no  intention  to  hold  the  seller  to  the  warranties  we 
have  mentioned.  A  contract  between  them  could  rest  upon  no  out- 
ward evidence  of  intention.  It  could  only  be  based  upon  the  fair- 
ness of  the  case.  And  this,  it  would  seem,  would  depend  upon  the 
knowledge  in  the  transferror. 

Where  there  is  an  indorsement,  these  reasons  obviously  do  not 
prevail.  The  transfer  of  an  unindorsed  instrument  payable  to 
bearer  is  akin  in  principle  to  the  transfer  of  an  ordinary  chattel, 
or,  more  correctly  speaking,  an  ordinary  chose  in  action.  The  trans- 
fer upon  an  indorsement  has  not  only  all  the  elements  of  the  trans- 
fer without  indorsement  but  also  those  arising  from  the  contract 
which  the  indorser  makes.  These  are  the  ones  specified  in  the  prin- 
cipal text.  For  reasons  we  have  already  given  he  is  held  bound  to 
warrant  that  a  bill  will  be  accepted.     Because  he  contracts  to  in- 

63  Milks  V.  Rich,  SO  N.  Y.  269;  Bruce  v.  Burr,  G7  N.  Y,  237;  Cardell  v. 
McNiel,  21  N.  Y.  336.  In  tliis  case,  notes  of  a  certain  bank  in  anotlier  city 
were  given  to  plaintiff  by  defendant  for  goods  bought  from  the  former.  On 
the  same  day  the  bank  stopped  payment.  Seven  days  afterwards  the  notes 
were  offered  to  defendant  and  payment  asked,  which  he  refused.  It  was 
held  that  plaintiff  could  not  recover.  It  was  his  duty  to  notify  the  defendant 
in  a  reasonable  time  of  the  insolvency  of  the  bank,  and  neglect  to  do  so  may 
have  been  prejudicial  to  the  defendant.  In  Henderson  v.  Appleton,  notes  of  a 
certain  bank  were  given  on  the  19th,  which  could  not  have  been  presented 
by  post  until  the  21st.  It  appeared  that  the  bank  had  stopped  payment  from 
the  17th.  On  the  21st  plaintiff  met  defendant  in  the  city  where  the  bank 
was  located,  and  offered  to  retiun  the  notes,  but  was  refused.  In  an  action  of 
assumpsit,  the  verdict  was  for  the  plaintiff.  Chit.  Bills  (10th  Ed.)  246,  note  4. 
See,  also,  the  case  of  Swinyard  v.  Bowes,  in  which  it  was  held  that  the  de- 
fendant, not  being  a  party  to  a  bill,  was  not  entitled  to  notice.  5  Maule  & 
S.  62. 


1G4  OF    THE    NATURE    OF    THE    LIABILITIES    OF    THE    PARTIES.       [Cll.    5 

demnify  the  holder  of  a  bill  or  note  he  is  held  to  warrant  against 
its  nonpayment  for  any  cause.  Tims,  in  warranting  its  genuineness, 
he  agrees  that  if  the  instrument  cannot  be  enforced  against  the 
drawer^  acceptor,  or  maker,  whose  names  api)ear  upon  it,  because 
these  names  are  forged,  these  defenses  will  not  avail  him;"*  and 
this  rule  also  applies  in  case  of  prior  indorsements.^'^  In  warrant- 
ing its  validity  he  agrees  that  if  the  paper  cannot  be  enforced  against 
the  acceptor  or  maker  because  of  some  illegality  in  its  inception, 
such  as  paper  given  for  a  gaming  debt,""  or  tainted  with  usury,®^ 
or  given  for  other  illegal  considerations,**  these  defenses  will  not 
avail  him.  In  warranting  the  competency  of  the  parties  he  agrees 
if  the  paper  cannot  be  enforced  against  the  original  parties  because 
they  were  incapable  of  contracting,  because  they  were  married  wo- 
men,"® or  because  they  were  a  copartnership,^"  or  as  an  agent,^^  or 
as  a  corporation,''^  that  these  defenses  will  not  avail  him.  And, 
the  reason  being  the  same  in  case  of  genuineness  and  competency, 

84  Coggill  V.  American  Exch.  Bank,  1  Comst.  (1  N.  Y.)  113;  Mosher  v.  Car- 
penter, 13  Hun,  G04;  TurnbuU  v.  Bowj-er,  40  N.  Y.  45G;  Meacher  v.  Fort,  3 
Hill  (S.  C.)  227,  and  Riley,  248;  Hannum  v.  Richardson,  48  Vt.  508;  Condon 
V.  Pearce,  43  Md.  83;  York  Co.  M.  F.  Ins.  Co.  v.  Brooks,  51  Me.  506;  Chase 
V.  Hathorn,  Gl  Me.  505;    Selser  v.  Brock,  3  Ohio  St.  302. 

8  5  Turner  v.  Keller,  66  N.  Y.  66;  Ogden  v.  Saunders,  12  Wheat.  313;  Fish 
V.  First  Nat.  Bank  of  Detroit,  42  Mich.  204,  3  N.  W.  S49;  Williams  v.  Tesho- 
mingo  Sav.  Inst.,  57  Miss.  G33. 

66  Bowyer  v.  Bampton,  2  Strange,  1155,  7  Mod.  334;  Edwards  v.  Dick.  4 
Bai-n.  &  Aid.  212. 

67  Morford  v.  Davis,  28  N.  Y.  481;  Ingalls  v.  Lee,  9  Barb.  G47;  McKnight 
V.  Wheeler,  6  Hill,  492;   Ord,  Usury,  109. 

68  Graham  v.  Maguire,  39  Ga.  531;   Succession  of  Weil,  24  La.  Ann.  139. 

6»  In  the  case  of  Erwin  v.  Downs,  it  was  held  that  the  indorsement  of  a 
promissory  note  imports  a  guaranty  that  the  makers  were  competent  to  con- 
tract, and  that  one  who  became  the  holder  of  such  a  note  for  a  valuable  con- 
sideration, before  maturity,  is  not  deprived  of  the  right  to  rely  upon  the 
gnaranty  of  the  indorser,  even  though  such  holder  have  knowledge  that  the 
makers  were  incompetent,  as  being  married  women.  Erwin  v.  Downs,  15  N. 
Y.  575;  Haly  v.  Lane,  2  Atk.  181;  Ken  worthy  v.  Sawyer,  125  Mass.  28; 
Robertson  v.  Allen,  3  Baxt.  233. 

TO  Dalrymple  v.  Hillenbrand,  62  N.  Y.  5. 

71  Burrill  v.  Smith,  7  Pick.  291. 

Tartcmsen  v.  Graves,  41  N.  Y.  471;  Zalbriskie  v.  Cleveland,  C.  &  C.  R.  Co, 
23  How.  (U.  S.)  399. 


Ch.   5]  WARRANTIES    OF    THE    INDORSER.  165 

it  is  probable  that  this  rule  applies  also  to  prior  indorsers."'^  In 
warranting  title  and  right  to  transfer  he  agrees  that,  if  the  instru- 
ment cannot  be  enforced  against  the  original  parties  because  it  was 
lost  by  them  or  stolen  from  them,  these  defenses  will  not  avail  him, 
because  he  held  himself  out  as  having  a  good  title,  and  therefore  a 
right  to  transfer.^*  And  all  the  warranties  are  binding  principally 
because  the  indorsement  is  a  distinct  contract. 

A  thoroughly  consistent  theory,  it  might  be  urged,  would  require 
that. if  the  principal  contract,  set  forth  on  the  face  of  the  instrument, 
is  void  ab  initio,  all  the  subsidiary  contracts  of  indorsement  depend- 
ing upon  it  would  also  be  of  no  legal  effect,  because  they  could  never 
give  life  to  a  contract  which  had  no  existence.  But  even  granting 
this  to  be  so,  yet  legal  theory  is  overruled  by  common  sense.  Be- 
sides, it  is  not  always  necessary  that  the  principal  contract  to  which 
a  collateral  contract  of  guaranty  is  added  should  be  enforced  in 
order  that  the  contract  of  guaranty  may  avail. ^^  A  guarantor  can 
sometimes  be  held,  although  no  suit  whatever  can  be  maintained 
on  the  original  debt.  For  it  is  sometimes  the  very  essence  of  a 
guaranty  that  it  is  given  because  the  principal  debt  cannot  be  enfor- 
ced, as  in  cases  where  the  guarantor  undertakes  to  be  responsible  for 
the  goods  to  be  supplied  to  a  married  woman  or  an  infant.  Neither 
does  the  fact  that  the  guarantor  cannot  call  upon  the  person  for 
whom  he  has  given  his  guaranty  constitute  any  defense.  The  party 
to  whom  the  guaranty  is  given  has  nothing  to  do  with  their  mutual 
relations.  The  indorser  guaranties  to  such  party  the  payment  of  the 
instrument,  and,  if  it  is  not  paid,  he  immediately  becomes  liable  upon 
this  guaranty.^®  Whether  also  he  knew  of  any  defects  in  the  instru- 
ment is  immaterial.     If  the  indorser  knew  of  defects,  he  is  undoubt- 

7  3  Daniel,  Neg.  Inst.  §  676. 

7  4  Edw.  Neg.  Inst.  §  407;  Daniel,  Neg.  Inst.  §  677;   Rand.  Com.  Paper,  §  755. 

7  6  McLaughlin  v.  McGovern,  34  Barb.  20S. 

76  Remsen  v.  Graves.  41  N.  Y.  471.  In  the  case  of  Lawson  v.  Farmers' 
Bank  it  was  held  by  the  court  that  the  liability  of  the  indorser  was  strictly 
conditional  and  dependent  upon  due  demand  upon  the  maker  or  acceptor  and 
also  due  and  legal  notice  of  nonpayment.  The  purpose  of  such  demand  is 
to  enable  the  indorser  to  look  to  his  own  interests  and  to  secure  his  own  in- 
demnity. Demand  and  notice  being  conditions  precedent  to  the  indorser's 
liability,  the  holder  must  make  proof  of  them  before  he.  can  recover.  Law- 
son  V.  Farmers'  Bank  of  Salem,  1  Ohio  St.  206. 


1G6  OF    THE    NATURE    OF    THE    LIABILITIES    OF    THK    PARTIES.       [Ch.  ■') 

edly  liable  under  the  general  principles  of  warranty  already  given.  If 
the  indoraer  did  not  know  of  defects,  he  is  none  the  less  liable  in 
damages  upon  the  construction  of  the  general  contract  of  indemnity 
he  made  when  he  indorsed  the  instrument. 

The  identity  of  this  contract  as  a  distinct  stipulation  becomes  more 
apparent  when  we  consider  the  practical  application  of  these  rules 
by  the  courts.  Where  the  bill  or  note  is  forged  or  altered,  for  ex- 
ample, it  is  void,  as  we  have  said,  because  in  fact  no  such  legal  ob- 
ligation was  ever  created.  Money,  therefore,  paid  upon  the  indorse- 
ment of  such  a  bill  or  note,  is  governed  by  the  same  principle  that 
governs  other  money  paid  under  a  mistake  of  fact.  In  other  cases 
the  equitable  action  for  money  had  and  received  will  lie  against  one 
who  has  received  money  which  in  conscience  does  not  belong  to 
him.'^^  And  so,  when  the  maker  or  acceptor  or  a  prior  indorser  has 
refused  to  pay  a  note  or  bill  upon  the  ground  that  it  is  void  because 
of  forgery,  or  alteration,  or  on  the  ground  of  usury,  gaming  consid- 
eration, or  the  like,  the  holder,  relying  upon  the  so-called  "warranty" 
of  the  indorser,  may  hold  him  upon  his  indorsement  for  the  money 
paid  to  him  for  the  instrument. 

INDORSER  WITHOUT  RECOURSE. 

79.  The  -warranties  specified  in  the  foregoing  section,  ex- 
cept that  of  payment,  apply  to  the  indorser  -writhout  re- 
course. 

The  indorser  without  recourse  and  the  transferror  of  a  bill  or  note 
by  delivery  stand  upon  much  the  same  footing.  So  far  as  an  in- 
dorsement and  transfer  is  a  promise  of  indemnity,  neither  the  trans- 
ferror without  indorsement  nor  the  indorser  without  recourse  prom- 
ise to  pay  the  instrument.  In  fact,  the  object  of  an  indorsement 
without  recourse  is  to  relieve  such  an  indorser  from  his  obligation  as 
a  promisor  of  indemnity.  He  exempts  himself  by  these  v/ords  from 
his  promise  to  pay  if  the  parties  antecedent  to  him  do  not.  But  be- 
cause it  is,  in  effect,  a  sale  where  the  indorser,  like  the  vendor  of  any 
chattel,  warrants  the  title  and  genuineness  of  the  thing  to  be  what 
it  purports,  or  if  he  was  without  title, '^^  so  it  does  not  relieve  him 

77  Kelly  v.  Solari,  9  Mees.  &  W.  54.     78  Challiss  v.  McCrum,  22  Kan.  157. 


Ch.    5]  THE    QUESTION    OF    DAMAGES.  167 

from  liability  if  tlie  instrument  lie  transfers  was  forged  ^®  or  illegal,^" 
or  not  what  it  purports.®^  Tliis  is  for  the  same  reason,  and  is  govern- 
ed by  the  same  principles,  already  stated  at  length,  which  govern 
transfer  by  delivery. 


DAMAGES  AGAINST  THE  ACCEPTOR,  MAKER,  DRAWER,  AND 

INDORSERS  UPON  THE  BILL  OR  NOTE  AND  UPON 

THE   WARRANTIES. 

80.  The  acceptor  of  a  bill  of  exchange  and  the  maker 
of  a  promissory  note  is  liable,  upon  its  dishonor,  for  the 
amount  of  the  bill  or  note  and  legal  interest,  and  also  no- 
tarial expenses  where  they  are  allo\i^ed  by  law. 

"Where  the  drawee  of  a  bill  of  exchange  has  agreed  for 
a  valuable  consideration  to  accept  it,  he  is  liable,  upon  its 
dishonor,  for  his  breach  of  promise  to  accept  in  all  dam- 
ages w^hich  are  the  immediate  consequences  of  such 
breach. 

The  measure  of  damages  to  be  recovered  against  a 
drawer  or  indorser  upon  his  indorsement  is — 

(a)  On  an  inland  bill:    the  amount  of  the  bill  and  in- 

terest, and  also   protest   fees  w^here  they  are  al- 
loTved. 

(b)  On  a  foreign  bill:   the  amount  of  the  bill,  interest, 

protest   fees,    re-exchange,    or   damages    in   lieu 

thereof. 
The   measure   of  damages   to   be   recovered  against  the 
drawer   or   indorsers   in   case  of  a  breach  of  warranty  is 
the  original  consideration. 

'»  Dumont  v.  Williamson,  18  Ohio  St.  515. 

80  Blethen  v.  Levering,  58  Me.  437.  In  this  case,  the  defendant  Indorsed 
to  the  plaintiflP,  "without  recourse,"  for  valuable  consideration,  a  note,  a 
short  while  before  its  maturity.  It  was  shown  that  there  was  no  consideration 
for  the  note  when  made,  and  it  was  held  that  in  such  case  the  defendant's 
liability  accrued  at  the  time  of  indorsement,  and  here  the  statute  of  limita- 
tion barred  the  action.    Hannum  v.  Richardson,  48  Vt  508. 

81  Ticonie  Bank  v.  Smiley,  27  Me.  225. 


IGS  OF    THE    NATURE    OF   THE    LIABILITIES    OF   THE    PARTIES.       [Ch.   5 

It  is  our  purpose  to  point  out  in  this  section  the  practical  appli- 
cation of  the  rules  we  have  laid  down,  by  showing  what  damages 
the  courts  administer  against  the  parties  upon  the  breach  of  their 
contracts.  For  the  present  we  shall  leave  the  matter  of  consider- 
ation as  a  basis  for  damage,  both  as  between  parties  immediate  and 
not  immediate,  out  of  the  question.  The  rules  pertaining  to  this 
point  will  be  discussed  further  on.  The  only  point  to  be  consid- 
ered is  the  damages  which,  assuming  the  contract  between  the  part- 
ies to  be  for  value,  and  enforceable,  the  courts  find  were  in  contem- 
plation of  the  parties  when  it  was  made. 

In  some  of  these  contracts,  important  items  are  exchange  and 
re-exchange.  Exchange,  as  we  have  seen,  is  the  market  value  in 
one  country  of  money  to  be  delivered  in  another.  The  drawer  of 
a  foreign  bill  contracts  for  its  payment  at  the  place  where  it  is 
drawn  payable.  When  the  bill  is  dishonored,  the  doctrine  of  re- 
exchange  applies.  Re-exchange  is  a  doctrine  founded  upon  equita- 
ble principles.  It  means,  for  instance,  when  the  payee,  for  ex- 
ample, gives  premium  for  a  bill  drawn  in  this  country  payable  in 
Paris,  France,  which  is  dishonored  in  Paris,  the  amount  which 
would  restore  the  payee  to  the  situation  he  was  in  when  he  bought 
the  bill.  This  is  either  the  payment  of  the  money  in  Paris  that  the 
payee  expected  to  and  would  get  there,  or  the  payment  in  this  coun- 
try of  those  sums,  together  with  the  difference  in  value  between 
the  whole  sum  at  Paris  and  the  same  amount  in  this  country.  This 
difference  in  value  is  ascertained  by  the  premium  on  a  bill  drawn 
in  Paris  and  payable  in  this  country  which  should  sell  at  Paris  for 
the  sum  claimed.®^  The  amount  and  nature  of  exchange  and  re- 
exchange  is  generally  regulated  by  statute  throughout  the  various 
states.  Interest  is  too  well  understood  to  need  definition.  Nota- 
rial fees  are  those  incurred  for  a  notary  where  protest  is  required 
or  permitted  by  law. 

The  other  principal  item  of  damage  is  the  amount  nominated  in 
the  principal  terms  of  the  paper,  and  this  discussion  principally  per- 
tains to  this,  and  how  far  the  warranties  relate  to  it.  The  general 
rule  is  that  the  acceptor  and  drawer  of  a  bill,  the  maker  of  a  note, 
and  all  indorsers  are  liable  for  the  amount  nominated  in  the  bill, 

82  Bank  of  U.  S.  v.  U.  S.,  2  How.  737. 


Ch.   5]  THE    QUESTION    OF    DAMAGES.  169 

and  interest.^'  In  addition  to  this,  the  rules  governing  these  par- 
ties as  to  re-exchange  and  fees  are  as  follows:  The  acceptor  at  com- 
mon law  is  probably  not  primarily  liable  for  re-exchange,  because 
his  contract  is  to  pay  the  money  named  in  the  bill  at  the  place  of 
payment  and  not  at  the  place  of  drawing;^*  nor  is  he  liable  for 
damages,^ ^  though  the  better  reason  seems  against  this  rule,  where 
the  acceptor  has  dishonored  the  bill  which  he  had  promised  to  pay 
and  the  drawer  has  been  obliged  to  pay  re-exchange.^®  It  is  prob- 
ably the  common-law  rule,  also,  that  the  maker  of  a  note  is  liable 
neither  for  re-exchange  nor  damages  because  of  the  supposed  rule 
that  notes  are  subject  to  the  rules  of  the  law  merchant  only  in  those 
respects  covered  by  the  enactment  of  the  statute  of  Anne;  *^  though 
it  must  be  added  that  this  point  is  by  no  means  settled.^*  Protest 
fees  are  chargeable  against  the  acceptor  and  maker  only  when  a 
protest  is  required  or  permitted  by  law.  But  when  it  is  required,  or 
permitted  but  not  required,  they  are  allowed  as  an  item  of  dam- 
age.*^  The  drawer  and  the  indorsers,  in  their  succession,  are  liable 
for  protest  fees,  and,  in  case  of  foreign  bills,  for  all  re-exchanges,  or 
else  damages  in  lieu  thereof."" 

These  rules  being  understood,  it  only  remains  to  consider  the  dam- 
ages administered  by  the  courts  with  reference  to  the  drawee,  when 
he  refuses  to  accept,  and  upon  the  warranties  which  have  been  the 
subject  of  discussion  in  this  chapter.     Of  these  latter,  the  students 

8  3  Daniel,  Neg.  Inst.  §  749;   Rand.  Com.  Paper,  §  1726. 

84  Newman  v.  Goza,  2  La.  Ann.  &42;    Trammell  v.  Hudmon,  56  Ala.  237; 
Watt  V.  Riddle,  8  Watts,  545. 
«8  Bowen  v.  Stoddard,  10  Mete.  (Mass.)  375;   Manning  v.  Kohn,  44  Ala.  343. 

86  Daniel,  Neg.  Inst.  §  4450;  Rand.  Com.  Paper,  §  1714;  Tied.  Com.  Paper, 
§  406. 

87  Martin  v.  Franklin,  4  Johns.  124;  Scofield  v.  Day,  20  Johns.  102;  Adams 
V.  Cordis,  8  Pick.  260;   Lodge  v.  Spooner,  8  Gray,  166. 

8  8  Lee  V.  Wilcocks,  5  Serg.  &  R.  48;  Grant  v.  Healey,  3  Sumn.  523,  Fed. 
Cas.  No.  5,696. 

8  9  .Tohnson  v.  Bank  of  Fulton,  29  Ga.  260;  German  v.  Ritchie,  9  Kan.  110; 
Merritt  v.  Benton,  10  Wend.  117  (where  it  was  held  that  the  protest  fee  is 
an  expense  to  which  the  holder  of  a  note  is  subjected  by  the  default  of  an 
indorser,  whose  duty  it  is  to  pay  at  maturity,  and  that  the  holder  should 
therefore  recover  it.  "It  may  fairly  be  considered  as  a  charge  incident  upon 
the  indorser's  failure  to  perform  his  contract"). 

8  0  Tied.  Com.  Paper,  §  407. 


170  OF    THE    NATURE    OF    THE    LIABILITIES    OF   THE    PARTIES.        [Ch.    5 

will  have  noticed  that  we  have  pointed  out  a  distinction  between 
the  acceptor,  on  the  one  hand,  and  the  drawer  and  indorser,  on  the 
other.  In  the  case  of  the  acceptor,  the  rules  of  law  were  merely 
to  the  effect  that  the  acceptor  was  estopped  from  denying  certain 
items.  There  was  nothing  of  a  promise  which  might  be  the  basis 
of  an  affirmative  right  contained  in  them.  The  acceptor's  liability, 
therefore,  is  limited  to  the  contract  contained  in  words  of  the  bill. 
But  the  liability  of  the  drawer  and  indorser  is  a  so-called  warranty, 
and  the  basis  of  an  afiSrmative  right  of  action.  It  is  different  in 
its  nature  from  the  estoppel  of  the  acceptor,  because  the  acceptor 
is  not  affirmatively  liable  as  acceptor  upon  them.  He  is,  however, 
liable  as  drawee  before  acceptance  to  the  drawer,  if,  under  certain 
circumstances,  he  does  not  accept  the  bill.  The  drawer,  as  we  have 
seen,  may  then  have  one  of  two  remedies.  He  may  either  sue  the 
drawee  upon  the  original  consideration  or  for  damages.^  ^  What 
the  original  consideration  is  will  be  different  according  to  the  cir- 
cumstances of  each  case.  Where  the  drawer  chooses  the  alterna- 
tive of  damages,  he  sues  upon  the  promise  to  accept,  and  the  dam- 
ages are  then  measured  by  his  loss  and  inconvenience,  and  not  by 
the  amount  of  the  draft.®^  The  promise  to  accept  is  then  the  foun- 
dation of  the  right  of  action,  and  not  the  bill  itself. 

The  general  rule  that  the  warrantor  shall  pay  so  much  as  the 
actual  value  of  property  falls  short  of  what  it  would  be  worth  if 
the  warranty  had  been  kept,  applicable  to  warranties  of  quality  or 
title  of  personal  property,  does  not  apply  to  bills  and  notes.^'  With 
negotiable  instruments  between  immediate  parties  the  recovery  of 
damages  is  limited  to  the  amount  paid  out  by  reason  of  the  breach 
of  warranty,  or,  in  other  words,  to  refunding  the  consideration.®* 

01  See  supra,  p.  80. 

92  2  Sutli.  Dam.  p.  104;  Ilsley  v.  Jones,  12  Gray  (Mass.)  260;  Sedg.  Dam. 
(6th  Ed.)  p.  296. 

83  Freeman  v.  Clute,  3  Barb.  424;  Pritchard  v.  Fox,  4  Jones  (N.  C.)  140; 
Sedg.  Dam.  (6th  Ed.)  p.  340. 

94  Munn  V.  Commission  Co.,  15  Johns.  43.  In  this  case  it  was  decided  that, 
where  a  payee  parts,  for  a  discount  greater  than  the  legal  rate  of  interest, 
with  a  valid  note  upon  which  he  might  maintain  an  action  when  mature,  such 
transfer  is  not  usurious,  even  where  the  payee  indorses  the  note.  The  in- 
dorsee may,  on  nonpayment  by  the  maker,  sue  the  indorser,  and  his  recovery 
will  be  the  amount  advanced  by  him  and  the  interest  thereon.    In  Cram  v. 


Ch.   5]  THE    QUESTION    OF    DAMAGES.  171 

The  right  upon  which  such  an  action  rests  is  that  upon  which  ac- 
tions for  moneys  had  and  received  also  rest.  The  first  element  of 
such  actions  is  that  money  or  property  has  been  received  by  tlie  de- 
fendant to  which  in  equity  and  good  conscience  he  is  not  entitled, 
and  the  court,  in  its  remedy,  aims  to  restore  just  the  property  re- 
ceived, neither  more  nor  less.  Thus,  if  the  indorser  proceeded 
against  on  the  warranty  is  an  accommodation  indorser,  he  is  not 
liable  to  parties  privy  to  that  fact,  because  there  is  no  consideration 
to  support  the  implied  contract.  To  apply  the  test  we  have  just 
given,  an  action  for  moneys  had  and  received  would  not  lie,  and 
hence  the  accommodation  indorser,  for  instance,  is  neither  a  guar- 
antor of  the  genuineness  of  an  instrument,®^  nor  liable  in  damages 
where  a  warrantor  would  in  other  instances  be.  In  case  of  the  war- 
rantor upon  a  consideration,  the  damages  are  measured  between 
immediate  parties  by  the  actual  loss  suffered.  In  Delaware  Bank 
V.  Jarvis,®^  two  courses  are  suggested:  Where  knowledge  of  the  de- 
fect on  the  part  of  the  warrantor  can  be  shown,  the  bill  or  note 
may  be  returned  as  worthless,  and  an  action  may  be  commenced 
at  once  to  recover  back  the  money  advanced  upon  it.  This  is  for 
the  reason  that  a  contract  procured  by  fraud  may  at  once  be  re- 
scinded by  the  injured  party.  The  other  course  is  to  rely  upon 
the  warranty  of  the  indorser,  and,  on  being  obliged  to  pay  money 
or  suffer  loss,  to  hold  the  warrantor  liable  for  damage  incurred, 
including  the  costs  incurred  in  defending  the  suit.  In  the  case  of 
an  express  indorsement,  it  is  immaterial  whether  there  is  knowledge 
on  the  part  of  the  warrantor  or  not.  He  is  liable  upon  his  contract 
of  indemnity.  The  measure  of  his  recovery  here,  also,  is  the  value 
of  consideration,  irrespective  of  the  face  of  the  instrument.  The 
consideration  may  always  be  shown  between  these  immediate  par- 

Hendricks,  the  above  case  was  cited  upon  a  point  similar,  and  the  decision 
was  to  the  same  effect.  7  Wend.  (N.  Y.)  569;  Ingalls  v.  Lee,  9  Barb.  647; 
Judd  V.  Seaver,  8  Paige,  548;  Hutchins  v.  McCann,  7  Port.  (Ala.)  94;  Noble  v. 
Walker,  32  Ala.  45G;  Raplee  v.  Morgan,  3  111.  501;  Semmes  v.  Wilson,  5 
Cranch,  C.  C.  285,  Fed.  Cas.  No.  12,G5S;  Bank  of  U.  S.  v.  Smith,  4  Cranch, 
C.  C.  712,  Fed.  Cas.  No.  93G.  But  see  contra,  Roark  v.  Turner,  29  Ga.  455; 
National  Bank  v.  Green,  33  Iowa,  140;   Durant  v.  Banta,  27  N.  J.  Law,  024. 

8  5  Susquehanna  Yalley  Bank  v.  Loomis,  85  N.  Y.  207. 

8  8  Delaware  Bank  v.  Jarvis,  20  N.  Y.  226;  Mandeville  v.  Marvin,  30  Hun, 
284. 


172  OF    THE    NATURE    OF    THE    LIABILITIES    OF    THE    PARTIES.       [Cll.   5 

ties,  and  the  consideration  proved  always  measures  the  amount  of 
the  recovery."^ 

These  rules  we  have  just  given  must  be  applied  with  caution. 
They  are  doubtless  the  settled  law  in  case  of  warranties  between 
immediate  parties.  But  even  between  immediate  pai'ties  there  is 
not  much  business  reason  why  the  general  rule  of  contracts  should 
be  departed  from  and  the  consideration  returned  rather  than  the 
contract  performed.  The  effect  of  the  consideration  should  be,  as 
in  other  cases,  only  to  make  the  indorser's  promise  of  indemnity 
binding,  and  not  to  furnish  a  measure  of  damages.  There  is  still 
less  reason  why  the  consideration  should  furnish  a  measure  of  dam- 
age between  parties  not  immediate.  As  between  them  the  consid- 
eration is  not  even  open  to  inquiry.*^  And  if  it  be  true  that  the 
consideration  is  eliminated  as  an  item  of  proof,  it  would  logically 
follow  that  it  would  be  eliminated  as  an  item  of  damage  also.  In 
which  case  the  other  ground  of  damage — ^the  promise  of  the  indorser 
to  pay  the  whole  instrument — remains  for  the  court  to  apply.  There  is 
privity  of  contract  sufficient  for  this  between  remote  parties  because 
privity  between  immediate  indorsers  is  carried  forward  through  the 
chain  of  indorsements  to  the  holder  prosecuting;  so  that,  in  the 
phraseology  of  the  old  common-law  remedies,  debt  would  lie  ®®  as 
well  as  assumpsit  for  moneys  paid  out  on  account  of  the  indorse- 
ment.^°°     And  thus  the  better  reason  seems,  in  case  of  parties  not 

87  Brown  v.  Mott,  7  Johns.  361;  Braman  v.  Hess,  13  Johns.  52;  Rapelye  v. 
Anderson,  4  Hill,  472;  Wiffen  v.  Roberts,  1  Esp.  261;  Livingston  v.  Hastie,  2 
Caines,  248. 

88  Cram  v.  Hendricks,  7  Wend.  569;  Munn  v.  Commi.^sion  Co.,  15  Johns.  44; 
Collier  v.  Nevill,  3  Dev.  31;  Littell  v.  Hord,  Hardin,  87;  Cowles  v.  McViokar, 
3  Wis.  725;   Importers'  &  T.  Nat.  Bank  v.  Littell,  47  N.  J.  Law,  234. 

89  Onondaga  County  Bank  v.  Bates.  3  Hill.  53.  In  this  case  the  court  re- 
ferred to  the  case  of  Wilmarth  v.  Crawford,  10  Wend.  (N.  Y.)  343,  in  which  it 
had  held  that  debt  would  lie  by  an  indorsee  against  the  maker  of  a  note  on 
the  ground  that,  since  the  statute  making  promissory  notes  negotiable,  the 
money  payable  thereby  became,  by  virtue  of  the  transfer,  due  and  payable  to 
indorsee  or  holder;  and  that,  in  judgment  of  law,  privity  of  contract  existed 
between  the  parties.  See,  also,  Hodges  v.  Steward,  1  Salk.  125;  Priddy  v. 
Henbrey,  1  Barn.  &  C.  674;  Stratton  v.  Hill,  3  Price.  2.53;  Riddle  v.  Mande- 
ville,  5  Cranch.  322. 

100  Barker  v.  Casidy,  16  Barb.  177. 


Ch.   5]       ACCOMMODATION    PARTIES    AND    PERSONS    ACCOMMODATED.  173 

immediate,  to  support  the  variation  from  the  rule  we  have  quot- 
ed, and  to  hold  that  as  to  them  the  face  of  the  paper  furnishes  the 
measure  of  damages. ^°^ 


ACCOMMODATION  PARTIES  AND  PERSONS  ACCOMMO- 
DATED. 

81.  AN  ACCOMMODATION  PARTY  — Means  a  person 
■w^ho  has  signed  a  bill  or  note  as  acceptor  or  dra^wrer, 
maker,  or  indorser,  "w^itliout  recompense,  and  for  the  pur- 
pose of  lending  his  name  to  some  other  person  as  a  means 
of  credit.i''^ 

82.  The  accommodated  party  impliedly  contracts: 

(a)  That  he  -will  pay  the  bill  or  note. 

(b)  That  he  will  repay  the  accommodation  party 

for   all   loss   incurred,  if  that   party  is  com- 
pelled to  pay  in  case  of  his  default. 

83.  The  accommodation  party  is  liable  to  all  parties  ex- 
cept the  party  accommodated. 

As  between  the  accommodated  and  accommodation  party,  the 
paper  is  given  gratuitously.  Between  them  there  is  no  binding 
contract,  because  the  accommodation  paper  is  not  based  upon  a 
consideration.  But  subsequent  parties,  who  discount  the  paper,  are 
on  a  different  footing.  With  them,  not  only  the  accommodated,  but 
also  the  accommodation,  party  may  be  considered  as  entering  into 
a  contract  upon  a  consideration  received  by  the  accommodated  party 
only,^"^  for  the  accommodation  party  has  offered  to  all  the  world 
to  loan  his  credit  upon  the  instrument.^"*  The  parties  who,  subse- 
quent to  the  offer,  have  either  discounted  the  instrument  or  paid 
for  it  when  due,  have  accepted  that  offer  and  paid  for.' it,  and  may 
enforce  it  even  though  themselves  subsequent  accommodation  par- 

101  Mason  v.  Mason,  3  Crauch,  C.  C.  648,  Fed.  Cas.  No.  9,245. 

102  Benj.  Chalm.  Dig.  art.  90;  Byles,  Bills,  131;  Rand.  Com.  Paper,  §  472; 
1  Pars.  Notes  &  B.  1S4. 

103  Yea  ton  v.  Bank  of  Alexandria.  5  Cranch,  49. 

104  Meyer  v.  Hibsber,  47  N.  Y.  2G5. 


174  OF    THE    NATURE    OF    THE    LIABILITIES    OF    THE    PARTIES.       [Ch.   5 

ties.^'"'     Thus,  in  accommodation  paper  there  are  three  classes  of 
relations  to  be  considered: 

(1)  The  liability  upon  the  paper  of  tlie  accommodated  party  to  the 
accommodation  party. 

(2)  The  liability  upon  the  paper  of  the  accommodating  party  to  tlie 
person  for  whose  accommodation  he  has  given  it. 

(3)  The  liability  upon  the  paper  of  the  accommodating  party  to 
all  the  other  parties  who  take  it.'"' 

In  case  of  a  bill,  if  the  acceptance  be  for  the  drawer's  accommo- 
dation, the  acceptor  does  not  thereby  become  entitled  to  sue  the 
drawer  upon  the  bill.  But  when  he  has  paid  the  bill,  and  not  be- 
fore, he  may  recover  back  the  amount  from  the  drawer  in  an  action 
for  money  had  and  received.^"^  This  is  equally  the  case  Avith  the 
accommodation  maker  of  a  note.  He  cannot  sue  the  payee  for 
whom  he  makes  the  accommodation.  In  either  case,  only  the 
amount  paid  by  the  accommodation  party  can  be  recovered.  The 
reason  for  this  is  that,  the  maker  and  acceptor  of  the  instrument  be- 
ing the  ultimate  parties  to  it,  when  the  instrument  is  paid  by  them 
it  is  extinguished,  and  no  longer  exists  as  a  valid  instrument.  There- 
fore, the  instrument  not  being  in  existence,  the  acceptor  or  the 
maker  cannot  recover  upon  the  instrument  itself.'"^  The  principle 
is  the  same  when  the  accommodation  party  is  subsequent  to  the 
party  ^°^  for  whom  he  gives  the  accommodation  as  where  the  accom- 
modated party  is  the  maker  of  a  note  and  the  accommodation  party 
is  payee.  There,  the  instrument  being  without  consideration  as 
between  the  payee  and  the  maker,  the  accommodation  party  cannot 
sue  the  accommodated  party,  because  the  instrument,  as  between 

lOB  Kelly  V.  Burroughs,  102  N.  Y.  93.  6  N.  E.  109. 

106  Hodges  V.  Nash,  43  111.  App.  G38,  .Tohns.  Cas.  Bills  &  N.  153;  Thatcher 
V.  West  River  Nat.  Bank,  19  Mich.  196;  Warder  v.  Gibbs,  92  Mich.  29.  52 
N.  W.  73.  The  fact  that  a  bill  or  uote  was  accommodation  paper  furnishes 
no  defense  as  against  one  advancing  money  upon  it.  Church  v.  Barlow.  9 
Pick.  (Mass.)  547;  Thompson  v.  Shepherd,  12  Mete.  (Mass.)  311;  Shaw  v. 
Knox,  98  Mass.  214;  Fowler  v.  Strickland,  107  Mass.  552;  Davis  v.  Randall, 
115  Mass.  547.     But  see  Quinn  v.  Fuller.  7  Cush.  (Mass.)  224. 

107  Pearce  v.  Wilkins,  2  N.  Y.  469. 

108  Griffith  V.  Reed,  21  Wend.  505;  Young  v.  Hockley,  3  Wils.  346;  Pom^-oy 
V.  Tanner,  70  N.  Y.  547;    Suydam  v.  Westfall,  2  Denio,  205. 

i'0  9  Van  Duzer  v.  Howe,  21  N.  Y.  531;   Kitchel  v.  Schenck,  29  N.  Y.  515. 


Ch.   5]       ACCOMMODATION    PARTIES    AND    PERSONS    ACCOMMODATED.  175 

them,  is  without  consideration  and  a  nudum  pactum.  The  accom- 
modated party  can  in  no  case  look  to  the  accommodation  party,  for 
the  reason  that  the  obligation,  as  between  them,  is  without  consid- 
eration and  a  nudum  pactum;  and  also  that  the  purpose  of  the  in- 
strument was  that  the  accommodation  party  should  give  it  "the 
security"  of  his  name.  This  being  the  intention  of  the  obligation, 
no  action  will  lie  in  behalf  of  the  party  to  whom  accommodation  is 
given.^^° 

These  relations  between  the  accommodated  and  accommodation 
parties  do  not  invalidate  it  as  to  third  parties.  Knowledge  of  the 
mere  want  of  consideration  between  the  original  parties  will  not 
alone  prevent  the  purchaser  from  becoming  a  bona  fide  holder.^^^ 
Accommodation  paper  is  daily  placed  in  the  market  for  discount  or 
sale,  and  the  indorsee  or  purchaser  who  knows  that  a  bill  or  note 
was  drawn,  made,  accepted,  or  indorsed  without  consideration  is  as 
much  entitled  to  recover  as  if  he  had  been  ignorant  of  the  fact.^^^ 
The  purchaser  of  accommodation  paper  with  mere  notice  of  the 
accommodation  is  a  bona  fide  purchaser.^  ^'  The  bill  is  accepted  or 
note  made  for  the  accommodation  of  another,  for  the  purpose  of 
furnishing  a  guaranty.  The  fact  that  all  the  world  knows  it  was 
a  guaranty  without  consideration  is  immaterial.^  ^*    And  if  the  ac- 

110  Jackson  v.  Warwick,  7  Term  R.  121;  Lancey  v.  Clark,  64  N.  Y.  209; 
Knight  V.  Hunt,  5  Bing.  432;  Sparrow  v.  Cliisman,  9  Barn.  &  C.  241;  Thomp- 
son v.  Clubley,  1  Mees.  «fe  W.  212.  In  this  action  by  an  indorsee  against  the 
acceptor  of  a  bill  of  exchange,  it  was  held  that  the  acceptor  might  show  that 
the  acceptance  was  for  the  accommodation  of  the  plaintiff,  and  that  he  had 
received  no  consideration  from  the  drawer,  and  also  that  it  was  agreed  that 
when  due,  the  bill  should  be  taken  up  by  the  plaintiff. 

111  Fitch  V.  McDowell,  80  Hun,  207,  30  N.  Y.  Supp.  31;  Palmer  v.  Field,  70 
Hun,  229.  27  N.  Y.  Supp.  736. 

112  Moore  v.  Cross,  19  N.  Y.  227;  Meyer  v.  Hibsher,  47  N.  Y.  265;  Montross 
V.  Clark,  2  Sandf.  (N.  Y.)  115;  Lincoln  v.  Stevens,  7  Mete.  uMass.)  529; 
Stephens  v.  Monongahela  Nat.  Bank,  88  Pa.  St.  103;  Thatcher  v.  Bank,  19 
Mich.  196;  Jones  v.  Berry  hill,  25  Iowa,  289;   Cronise  v.  Kellogg,  20  111.  11. 

lis  Grant  v.  Ellicott,  7  Wend.  (N.  Y.)  227;  Brown  v.  Mott,  1  Johns.  (N.  Y.) 
361;  Montross  v.  Clark,  2  Sandf.  (N.  Y.)  115;  Thatcher  v.  West  River  Bank, 
19  Mich.  202;  Charles  v.  Marsden,  1  Taunt.  224;  Jones  v.  Berry  hill,  25  Iowa, 
289;   Bank  of  Ireland  v.  Beresford,  6  Dow,  237. 

114  In  the  case  of  Grant  v.  Ellicott,  7  Wend.  (N.  Y.)  227,  holding  that,  in  an 
action  by  the  payee  against  the  acceptor,  the  fact  of  an  acceptance  being  for 


176  OF    TIIK    NATURE    OF    THE    LIABILITIES    OF    THE    PARTIES.       [Ch.   5 

commodation  party  seeks  a  defense  in  saying  that  it  is  accommoda- 
tion paper,  it  will  not  be  necessary  for  the  holder  to  show  on  his 
part  in  rebuttal  that  he  gave  value  for  it. 

This  rule  is  subject  to  modifications.  In  New  York,  for  in- 
stance,^ ^"^  the  authorities  depart  from  the  well-established  and  prob- 
ably wiser  English  rule.  An  accommodation  indorser  is  discharged 
by  the  transfer  of  a  bill  or  note  after  maturity,  because  it  is  consid- 
ered unfair  to  treat  an  accommodation  indorsement  as  a  continuing 
guaranty.^^^  It  was  not  the  intention  of  the  accommodation  in- 
dorser to  be  liable  upon  his  indorsement  for  all  time.  It  was  only 
his  intention  to  give  indemnity  to  such  persons  as  took  the  bill  or 
note  during  the  time  when,  by  its  terms,  it  was  supposed  to  circulate 
or,  in  other  words,  up  to  the  time  of  the  maturity  of  the  instrument. 
And  it  would  be  contrary  to  the  intention  of  the  parties  and  unwar- 
rantable to  create  extensions  of  time  after  the  instrument  had  be- 
come due.  This  modification  prevails  in  some  other  statesi.^^^  It  is 
in  direct  contradiction  to  the  English  and  to  the  common-law  rule.^^* 

accommodation  was  no  defense,  the  court  cited  tlie  opinion  of  Lord  Eldon  in 
Smitli  V.  Knox,  3  Esp.  4G,  to  the  effect  that  where  an  accommodation  paper 
is  sent  out  it  is  no  answer,  in  an  action  upon  such  bill,  that  the  acceptor  ac- 
cepted for  the  accommodation  of  the  drawer,  and  that  such  fact  was  known 
to  the  holder.  If  a  bona  fide  consideration  were  given,  the  holder  could  re- 
cover, though  with  full  knowledge  of  the  transaction.  See.  also,  Charles  v. 
Marsden,  1  Taunt.   224. 

115  Chester  v.  Dorr,  41  N.  Y.  279. 

116  In  the  case  of  Chester  v.  Dorr,  it  was  held  that  an  accommodation  in- 
dorser, without  consideration,  of  a  promissoi-y  note,  is  not  liable  to  a  trans- 
feree after  maturity  from  the  person  for  whose  accommodation  it  was  In- 
dorsed, although  the  transferee  paid  full  consideration.  The  defense  of  want 
of  consideration  attaches  after  maturity,  into  whatever  hands  it  may  come. 
In  the  course  of  his  opinion.  Woodruff,  J.,  said:  "I  deem  the  just  view  of  the 
subject  to  be  that  when  a  note  has  become  due,  and  is  dishonored,  the  rights 
and  responsibilities  of  the  parties  thereto,  are  fixed  *  *  *  and  thereafter 
he  who  takes  it  takes  it  with  knowledge  of  its  dishonor,  *  ♦  ♦  and  with 
just  such  right  to  enforce  it  as  the  holder  had,  and  nc  other."  Chester  v. 
Dorr,  41  N.  Y,  279.     See  also,  Hascall  v.  Whitmore.  19  Me.  102. 

117  Bower  v.  Hastings,  36  Pa.  St.  285;  Barnett  v.  Offerman,  7  Watts.  130; 
Hoffman  v.  Foster.  43  Pa.  St.  137;  Battle  v.  Weems,  44  Ala.  105;  Miller  v. 
Larned,  103  111.  570.' 

118  Charles  v.  Marsden,  1  Taunt.  224;  Sturtevant  v.  Ford,  4  Man.  &  G.  101; 
Carruthers  v.  West,  11  Q.  B.  143;  Stein  v.  Yglesias,  3  Dowl.  252;  First  Nat 
Bank  of  Salem  v.  Grant,  71  Me.  374,  with  note. 


Ch.   5]       ACCOMMODATION    PARTIES    AND    PERSONS    ACCOMMODATED.  177 

Another  modification  of  this  rule  applying  to  immediate  parties  is 
in  case  of  what  is  called  "diversion."  It  often  happens  that  one 
business  man  tells  a  second  that  he  wants  to  borrow  his  credit  for  a 
specified  purpose,  and,  to  further  that  purpose,  the  second  man  ac- 
cepts a  bill,  or  makes  or  indorses  a  note  for  the  first  to  discount 
This  arrangement  amounts  to  an  agreement  between  them  that  the 
instrument  shall  be  devoted  to  that  especial  purpose.  And  the 
questions  arising  upon  the  diversion  of  accommodation  paper  are 
mainly  whether  the  instrument  has  been  used  for  the  purpose  for 
which  it  was  given  or  not 

The  cases  make  a  distinction  between  material  and  immaterial 
diversion.  A  material  diversion  has  these  elements:  (1)  The  ac- 
commodation party  must  have  some  interest  in  the  application  of  the 
money  raised  on  the  bill  or  note.  Unless  he  has,  he  is  not  in  a  posi- 
tion to  object  that  there  has  been  a  misapplication  of  the  paper  on 
which  he  is  the  accommodation  party.^^^  (2)  The  accommodation 
bill  or  note  must  be  made  for  some  specific  purpose,  and  be  diverted 
to  some  other  purpose.^ ^^  An  immaterial  diversion  is  where  an  ac- 
commodation bill  or  note  is  made  for  the  purpose  of  loaning  the 
parties  credit  generally,^^^  or  where  the  substantial  design  for  which 
the  instrument  was  given  is  not  departed  from,^^^  or  where  the 
agreement  for  which  the  instrument  was  given  and  which  is  broken 
is  not  one  of  substance  and  is  unimportant.  An  immaterial  diver- 
sion cannot  avail  as  a  defense.  A  material  diversion  is  thus,  in  some 
respects,  like  a  contract,  based  upon  a  consideration.  There  is  some 
substantial  interest  at  stake  which  makes  it  binding  upon  the  ac- 
commodation party  to  carry  out  its  purpose.  If  he  fails  to  do  this, 
the  reason  for  its  being  given  fails.  It  then  becomes  the  duty  of 
the  accommodated  party  having  it  in  possession  to  return  it  The 
parties  to  it  are  discharged,  because  it  is  no  longer  a  contract  If, 
in  defiance  of  the  agreement,  the  note  is  misapplied,  then  it  is  a 

ii»Edw.  Neg.  Inst.  §  451;  Mohawk  Bank  v.  Corey,  1  Hill,  513;  Story, 
Bills,  §  191;  Dawson  v.  Goodyear,  43  Conn.  548;  Qiiinn  v.  Hard,  43  Vt  875; 
Fetters  v.  INIuneie  Nat.  Bank,  34  Ind.  254. 

120  Bank  of  Rutland  v.  Buck,  5  Wend.  66;  Kasson  v.  Smith,  8  Wend.  437; 
Spencer  V.  Ballou,  18  N.  Y.  327;   Woodhull  v.  Plolmes,  10  .Tohus.  231. 

121  Cole  V.  Saulpaugh,  48  Barb.  104;    Schepp  v.  Carpenter,  51  N.  Y.  602. 

122  Bank  of  Chenango  v.  Hyde,  4  Cow.  5G7;  Powell  v.  Waters,  17  Johns.  176. 

NEG. BILLS — 12 


178  OF    THE    NATURE    OF   THE    LIABILITIES    OF    THE    PARTIES.       [Ch.   5 

fraud,  which,  as  in  the  case  of  other  contracts,  vitiates  the  agree- 
ment between  parties  and  privies,  and  against  the  defense  of  which 
the  courts  will  allow  no  recovery.^^'  The  purchaser  of  accommoda- 
tion paper  obtained  by  fraud,  deception,  or  fraudulently  misapplied, 
with  notice  of  these  facts,  is  not  a  bona  fide  holder,  but  rather,  if  he 
attempts  to  recover  upon  the  paper,  is  a  partaker  in  the  fraud.^^* 

Carrying  in  mind  that  accommodation  paper  is  a  mere  loan  of 
credit,  or,  as  it  sometimes  is  put,  a  loan  of  money,  the  purchaser  be- 
ing the  lender,  and  the  seller  of  the  paper  the  borrower,^ ^"  it  is 
easy  to  reach  the  next  logical  step  in  the  theory.  Wliere  there  is  no 
limitation  or  restriction  as  to  the  manner  in  which  accommodation 
paper  is  to  be  used,  the  accommodated  party  is  at  liberty  to  sustain 
his  credit  with  it  in  any  way  he  chooses.  He  may  appropriate  it  to 
any  purpose.  In  such  a  case  there  can  be  no  substantial  material 
diversion;  ^^^  and,  even  when  there  is  a  departure  from  the  express 
directions  of  the  accommodation  party  in  regard  to  the  note,  it  will 
sometimes  not  amount  to  a  material  diversion.  The  accommoda- 
tion party  may,  for  instance,  direct  it  to  be  discounted  at  one  bank, 
and  the  accommodated  party  may  discount  it  at  another,^ ^^  and  gen- 
erally, if  the  paper  has  accomplished  the  purpose  in  the  minds  of  the 

i23Denniston  v.  Bacon,  10  .Tohns.  19G. 

124  In  the  case  of  Small  v.  Smith,  1  Denio  (N.  Y.)  583.  It  was  held  that 
where  accommodation  paper  had  been  negotiated  in  violation  of  an  agree- 
ment between  payee  and  maker,  upon  which  agreement  the  payee  had  in- 
dorsed, the  holder  could  not  recover  against  such  accommodation  indorser, 
unless  the  note  had  been  received  in  good  faith,  for  a  valuable  consideration, 
and  without  notice  of  the  agreement.  Where  the  holder  took  such  a  note 
with  notice  of  an  agreement,  he  was  held  to  have  taken  subject  thereto. 
Warden  v.  Howell.  9  Wend.  170;  Brown  v.  Taber,  5  Wend.  56G:  Farmers' 
Bank  v.  Noxon,  45  N.  Y.  762;  Stoddard  v.  Kimball,  6  Cush.  4G9;  Daggett  v. 
Whiting,  35  Conn.  372;  Evans  v.  Kymer,  1  Barn.  &  Adol.  528;  Key  v.  Flint, 
8  Taunt.  21;  Gray  v.  Bank  of  Kentucky,  29  Pa.  St.  3G5;  Dunn  v.  Weston,  71 
Me.  270;    Hidden  v.  Bishop,  5  R.  I.  29. 

126  Claflin  V.  Boorum,  25  N.  E.  360,  122  N.  Y.  385;  Clark  v.  Sisson,  22  N. 
Y.  312;    Newell  v.  Doty,  33  N.  Y.  83. 

126  Cole  V.  Saulpaugh,  48  Barb.  104;  Seneca  Co.  Bank  v.  Neass,  3  N.  Y.  442; 
Grandin  v.  Le  Roy,  2  Paige,  509;  Mohawk  Bank  v.  Corey,  1  Hill.  514;  Aga- 
wam  Bank  v.  Strever,  18  N.  Y.  502. 

127  Powell  v.  Waters,  17  Johns.  176;  Bank  of  Cheuango  v.  Hyde,  4  Cow. 
567. 


Ch.   5]       ACCOMMODATION    PARTIES    AND    PERSONS    ACCOMMODATED.  179 

parties  at  the  time  of  giving  the  accommodation  and  answers  the 
test  that  it  has  in  no  wise  changed  the  responsibility  of  any  of  them, 
the  diversion  will  be  disregarded  by  the  courts  and  deemed  imma- 
terial.*^' 

128  Duel  V.  Spence,  1  Abb.  Dec.  559;  Seneca  Co.  Bank  v.  Neass,  3  N.  Y.  442; 
Duncan  v.  Gilbert.  29  N.  J.  Law.  521;  Jackson  v.  First  Nat.  Bank,  42  N.  J. 
Law,  178;  Briggs  v.  Boyd,  37  Vt  538;  Dunn  v.  Weston.  71  Me.  270. 


180  TRANSFER.  [Ch.   6 

CHAPTER   VI. 

TRANSFER. 

84.  Definition. 

85.  Validity  between  Immediate  Parties. 

86.  Metliods    of    Transfer. 

87.  By  Assignment. 

88.  By  Operation  of  Law. 
89-90.  By  Indorsement 

91.  By  Delivery. 

92.  Overdue  Paper. 

DEFINITION. 

84.  The  transfer  of  a  bill  or  note  is  either  the  assign- 
ment or  devolution  of  the  right  to  its  enforcement. 

Thus  far  we  have  been  considering  tlie  two  classes  of  contracta 
embodied  in  negotiable  bills  and  notes.  They  are  the  contract  em- 
bodied on  the  face  of  the  bill  and  of  the  note,  and  the  contract  em- 
bodied in  their  acceptance  and  in  their  indorsement.  We  have 
examined  the  elements  necessary  to  constitute  each  of  those  classes 
of  contracts,  and  the  nature  and  extent  of  the  obligations  that  were 
assumed  by  their  parties.  And,  because  in  this  work  we  have  only 
sought  to  apply  these  rules  to  negotiable  bills  and  notes,  in  the  out- 
set we  examined  and  discussed  negotiability,  its  y^'culiar  immuni- 
ties, and  the  reasons  for  it,  and  in  wiiat  ways  negotiable  instruments 
were  distinguished  from  nonnegotiable  ones. 

The  present  chapter  opens  a  new  phase  of  the  subject.  The  past 
chapters  have  sought  to  explain  principally  the  legal  rules  which 
govern  and  the  relations  which  are  created  by  the  fundamental  con- 
tracts upon  which  the  law  of  negotiable  instruments  rests.  The 
future  chapters  seek  to  explain  the  rules  w'hich  courts  have  en- 
forced in  the  transfer  of  instruments,  and  particularly  with  refer- 
ence to  their  circulation  as  an  equivalent  for  money.  The  under- 
lying problem  before  courts  in  laying  down  these  rules  has  been 
to  determine  what  was  sound  policy  for  a  circulating  medium,  and 


Ch.   6]  VALIDITY    BETWEEN    IMMEDIA.TE    PARTIES.  181 

also  what  was  just  and  equitable  where  interests  and  rights  of  par- 
ties to  the  instrument  conflict.  In  this  last  respect  the  problem  dif- 
fers accordingly  as  the  parties  may  have  contracted  directly  with 
each  other  or  as  they  may  have  acquired  rights  against  other  parties 
by  virtue  of  the  transfer  of  the  instrument  For,  as  we  have  seen, 
in  many  instances  parties  by  the  transfer  of  the  instrument  become 
liable  to  or  acquire  rights  against  others  of  whom  they  have  no 
knowledge  or  with  whom  they  have  had  no  business  transactions.  And 
since  most  relations  of  contract  depend  upon  the  theory  that  rights 
are  acquired  or  liabilities  are  assumed  by  virtue  of  the  express  or 
the  implied  agreement  of  the  person  enforcing  the  right  or  against 
whom  the  right  is  enforced,  it  is  obvious  that  some  system  different 
from  that  of  the  ordinary  rules  of  contract  must  be  developed.  This 
system  we  shall  examine  by  first  investigating  the  nature  of  trans- 
fer, then  the  common  defenses  which  arise  in  the  circulation  of  the 
instrument  and  their  effect  in  case  of  immediate  and  remote  par- 
ties and  lastly  the  unique  position  in  contract  of  the  purchaser  for 
value  withX)ut  notice. 

VALIDITY  BETWEEN  IMMEDIATE  PARTIES. 

85.  As  between  immediate  parties  or  parties  privy,  any 
cause  -which  -would  invalidate  an  ordinary  contract  "will 
invalidate  the  contract  created  by  the  transfer. 

A  negotiable  instrument  containing  indorsements  is  an  aggregate 
of  independent  contracts.  It  often  evidences  as  many  distinct  busi- 
ness transactions  as  there  are  contracts.  Each  distinct  trans-' 
action  may  be  widely  different  from  every  other.  And  the  legal  re- 
lations of  the  parties  created  by  every  individual  transaction  may  be 
as  widely  different  as  the  transactions  themselves  are  distinct. 
Ordinarily,  the  instrument  itself  shows  the  parties  who  participated 
in  a  single  transaction.  They  are  technically  spoken  of  as  "imme- 
diate parties."  Parties  who  participated  in  different  transactions 
are  called  "remote."  Ordinarily,  too,  the  instrument  itself  shows  to 
which  class  these  parties  belong.     Tlie  maker  and  payee  of  a  note,^ 

iPuget  de  Bras  v.  Forbes,  1  Esp.  1171;  Jefferies  v.  Austin,  1  SU'auge,  674; 
Keuuedy  v.  Goodman,  14  Neb.  585,  16  N.  W.  834, 


182  TRANSFER.  [Cll.  & 

the  drawer  and  acceptor  of  a  bill,^  the  indorser  and  immediate  in- 
dorsee of  a  note  or  bill,^  the  drawer  and  payee  of  a  bill,*  are  imme- 
diate parties.  The  indorsee  and  maker  of  a  note,"  or  the  indorsee 
and  one  who  is  not  his  immediate  indorser,'  are  remote  parties. 
And  the  conclusion  to  be  drawn  from  the  instrument  itself  is  that 
the  maker  and  payee  of  a  note,  for  instance,  participated  in  one 
transaction,  while  the  third  and  fourth  indorsers  participated  in 
another,  and  perhaps  a  widely  different  one.  This  is  merely  a 
presumption,  however,  and  not  of  very  much  effect.  Sometimes 
the  instrument  does  not  show  who  are  the  immediate  and  who  the 
remote  parties.  In  such  cases  the  ostensible  and  real  relations 
of  the  parties  may  be  shown.  Thus,  where  an  accommodation  note 
was  both  made  and  indorsed  for  accommodation  and  then  delivered, 
without  consideration,  to  the  plaintiff,  the  court  said  that  the  real 
relation  of  the  parties  could  be  shown,  and  that  the  lack  of  considera- 
tion between  them  was  a  complete  defense.'^  The  mere  position  of 
these  parties  on  the  paper,  as  not  immediate,  does  not  in  fact  make 
them  so.  And  the  true  nature  of  the  transaction  can  be  given  in 
evidence. 

It  once  being  determined  whether  the  parties  to  an  instrument 
between  whom  there  is  controversy  are  immediate  or  remote,  it 
then  becomes  clear  whether  the  general  rules  of  law  applicable 
to  contracts,  or  the  peculiar  rules  and  equitable  theories  applica- 

a  Thomas  v.  Thomas,  7  Wis.  476. 

8  Easton  v.  Pratchett,  1  Cromp.,  M.  &  R.  798;  Holliday  r.  Atkinson,  5  Bam. 
&  C.  501.  This  was  an  action  on  a  promissory  note  indorsed  without  consid- 
eration, and  brought  by  the  indorsee  after  death  of  the  giver,  against  the 
executors,  and  the  decision  was  against  an  action  lying  in  such  case,  there 
being  no  legal  consideration.  Abbott  v.  Hendriclis,  1  Man.  &  G.  791:  Klein 
V.  Keyes,  17  Mo.  326. 

4  McCulloch  V.  Hoffman,  10  Him,  133.  In  this  case,  in  which  plaintiff  was 
payee  and  defendant  was  drawer,  it  was  held  competent  to  prove  certain  facts 
and  circumstances  of  Hoffman's  signature,  and  that  the  subject  of  consid- 
eration might  be  inquired  into,  since  the  action  was  between  the  original  par- 
ties. 

B  Bumes  v.  Scott,  117  U.  S.  582,  6  Sup.  Ct.  865;  Chemical  Electric  Light  & 
Power  Co.  v.  Howard,  148  Mass.  359,  20  N.  E.  92. 

e  Etheridge  v.  Gallagher,  55  Miss.  464. 

T  Powers  V.  French,  1  Hun,  582. 


Ch.    6]  VALIDITY    BETWEEN    IMMEDIATE    PARTIES.  183 

ble  to  negotiable  bills  and  notes,  apply.  If  the  parties  are  imme- 
diate, and  the  controversy  is  between  them  as  parties  to  a  distinct 
contract,  then  any  defense  which  is  suflScient  to  prevent  the  enforce- 
ment of  an  ordinary  contract  will  prevail.®  To  them  the  theories  of 
the  purchaser  for  value  do  not  apply,  for  it  is  no  part  of  the  theory 
of  negotiability  that  it  should  give  immunity  to  the  person  who 
has  procured  the  instrument  through  fraud  or  misrepresentation 
or  duress,  or  through  an  illegal  consideration,  or  who  has  found  or 
stolen  it.  Negotiability,  as  a  theory,  only  aims  to  protect  innocent 
parties,  who  have  taken  the  instrument  in  ignorance  of  the  existence 
of  these  defenses,  effecting  some  contract  embodied  in  the  instru- 
ment before  the  innocent  party  takes  it.  Therefore  an  immediate 
party  to  a  contract  who  has  been  guilty  of  fraud,  misrepresentation, 
and  duress  must  suffer  as  against  him  upon  whom  he  has  committed 
such  a  wrong. 

In  general,  where  the  parties  are  remote,  then  the  theories  of 
negotiability  apply.  The  fact  of  importance  in  the  doctrine  of  nego- 
tiable instruments  is  the  presumption  in  favor  of  the  purchaser  for 
value  without  notice  necessary  to  preserve  the  instrument  as  a  cir- 
culating medium.^      The  remote  party  is  one,  who  knows  nothing  of 

8  Lack  of  consideration,  Murphy  v.  Keyes,  39  N.  Y.  Super.  Ct.  18;  Wilson  v. 
Ellsworth,  25  Neb.  240,  41  N.  W,  177;  Kulenkamp  v.  Groff,  71  Mich.  675,  40 
N.  W.  57;  Macomb  v.  Wilkinson,  83  Mich.  486,  47  N.  W.  336.  But  see  In  re 
King's  Estate,  94  Mich.  411,  54  N.  W.  178;  Thacher  v.  Dinsmore,  5  Mass.  299; 
Hodgkins  v.  Moulton,  100  Mass.  309;  Black  v.  Ridgway,  131  Mass.  80.  Du- 
ress, Clark  V.  Pease,  41  N.  H.  414.  Fraud,  Vathir  v.  Zane,  6  Grat.  246;  Rog- 
ers V.  Morton,  12  Wend.  484.  Illegality,  Edmunds  v.  Groves,  2  Mees.  &  W.  64^; 
Cummings  v.  Boyd,  83  Pa.  St.  372;  Wright  v.  Ii-win,  33  Mich.  32;  Bierce  v. 
Stocking,  11  Gray  (Mass.)  174.  Loss  or  theft,  Millis  v.  Barber,  1  Mees.  &  W. 
425. 

9  It  was  held  in  an  anonymous  case  that  where  a  bank  bill  payable  to  A  or 
bearer  was  lost,  and  was  after^A'ards  found  by  X,  and  was  by  him  assigned  to 
Y  for  value,  who  got  a  new  bill  in  his  own  name,  an  action  in  trover  for  the 
first  bill  would  not  lie  against  Y.  1  Ld.  Raym.  738.  An  action  was  brought 
against  the  acceptor  by  an  indorsee,  and  the  defendant  offered  to  prove  the 
drawer's  name  forged,  but  it  was  held  that  such  proof  would  not  be  a  de- 
fense against  an  acceptance  which  gave  credit  to  the  bill.  Jenys  v.  Fowler, 
2  Strange.  946.  A  note  was  made  payable  to  J.  C.  in  consideration  of  money 
given  to  be  used  in  gambling,  and  indorsed  by  J.  C.  to  the  plaintiff  for  value. 
It  was  held  that  the  plaiutifl:  could  not  recover,  even  though  he  had  no  notice 


184  TRANSFER.  [Ch.  6 

the  facts  of  defense  which  have  arisen  between  immediate  parties. 
He  has  not  contracted  with  them,  and  is  ignorant  of  their  transac- 
tions. He  is  to  be  protected  in  paying  money  or  giving  value  for 
the  instrument  from  the  wrong  other  parties  have  committed.  The 
wrong  which  has  tainted  their  contract  does  not  vitiate  his.  He 
stands  in  the  position  of  one  fortified  by  the  doctrines  of  equity,  who 
will  be  protected  by  courts,  because  the  loss  was  not  occasioned  by 
his  act,  but  rather  that  of  some  prior  party  of  whom  he  knows 
nothing.^" 

Bills  and  notes  are  of  that  species  of  personal  property  called 
choses  in  action.  They  are  orders  or  promises  to  pay  money  at 
some  future  time  to  which  commercial  usage  has  given  a  present 
value  by  means  of  the  process  of  discount.     Just  as  any  tangible 

of  the  use  to  which  the  money  had  been  put.  Bowyer  v.  Bampton,  Id.  1153. 
In  Grey  v.  Cooi)er,  an  action  by  indorsee  against  the  drawer  of  a  bill,  pay- 
able to  W.,  who  in  turn  indoreed  it  to  another,  and  which  finally  came  into 
possession  of  plaintiffs  by  indorsement,  it  was  pleaded  in  defense  that  the 
payee  was  an  infant.  Held,  that  the  drawer  was  charged,  on  the  guound 
that,  according  to  the  bill,  he  engaged  to  pay  to  the  order  of  the  payee,  who- 
ever that  might  be.  3  Doug.  65.  In  Smith  v.  Chester,  it  was  held  that  an 
indorsee  in  an  action  against  an  acceptor,  must  prove  the  handwriting  of  the 
first  indorser,  as  a  bill  would  be  no  payment  to  the  one  in  whose  favor  it  was 
drawn,  unless  indorsed  by  him.    1  Term  R.  654. 

10  In  Prouty  v.  Roberts  the  action  was  upon  a  note  payable  to  D.  W.  or 
order,  signed  by  defendant,  and  indorsed  by  D.  W.  It  was  claimed  by  de- 
fendant tJiat  there  had  been  no  legal  transfer  of  the  note,  as  it  had  been  ob- 
tained by  H.  &  F.  under  false  representations,  and  that  the  plaintiff  took  the 
note  with  knowledge  of  the  facts.  It  was  held  that  the  plaintiff  proved  a 
legal  title  to  the  note,  and  the  facts  stated  by  the  defendant  w^ere  no  defense 
if  proved.  The  plaiiitifC  was  called  upon  to  pay  only  what  he  had  agreed,  and 
payment  to  the  plaintiff  discharged  the  debt.  6  Cush.  (Mass.)  19.  lu  Lowe  v. 
Waller  an  action  was  broug-ht  against  the  acceptor  of  a  bill,  of  which  the  in- 
dorser, L.,  was  also  the  maker  and  payee.  This  bill  was  indorsed  to  H.  &  S., 
by  whom  it  was  indorsed  to  plaintiff.  It  was  pleaded  that  the  bill  was  upon 
a  usurious  contract  between  defendant  and  H.  &  S.  In  accordance  with  the 
principle  laid  down  in  Bowyer  v.  Bampton,  this  was  held  a  good  defense.  2 
Doug.  736.  In  Duncan  v.  MoiTison  it  was  held  that  an  assignee  of  note  or  bill 
not  mature  takes  free  from  defenses  of  which  he  has  no  notice.  Breese  (111.) 
151.  To  the  same  effect,  see  Murray  v.  Beckwith.  81  111.  43;  Cook  v.  Nor- 
wood, 106  111.  55S;  Vanliew  v.  Second  Nat.  Bank,  21  111.  App.  126;  Miller  v. 
Larned,  103  111.  562;  Smith  v.  Livingstone,  111  Mass.  342;  Gilson  v.  Stevens 
M.nijuf'g  Co.,  124  Mass.  546. 


Ch.  6]  VALIDITY    BETWEEN    IMMEDIATE    PARTIES.  185 

property  so  are  they  bought  and  sold  in  the  financial  market;  but 
they  differ  from  tangible  property  in  their  sale,  in  that  the  transfer 
of  one  is  effected  by  the  delivery  of  the  thing  itself,  while  with 
bills  and  notes  merely  the  right  to  enforce  the  payment  at  some  fu- 
ture time  generally  passes  to  the  purchaser.  In  other  words,  the 
transfer  of  commercial  paper  depends  upon  the  theories  of  assign- 
ment or  devolution  of  contract  right,  and  not  upon  the  principles 
of  bargain  and  sale.  And  if  in  the  bill  or  note  there  is  present  the 
element  of  negotiability  then  these  doctrines  are  extended  or  modi- 
fied by  those  of  negotiability.  Thus  title  to  a  negotiable  instru- 
ment may  be  acquired  either  through  assignment,  devolution  of  in- 
terest, or  negotiation.  By  title  is  meant  the  right  to  enforce  the  in- 
strument itself.  The  student  is  to  observe  that  the  transfer  of  title 
means  not  only  the  transfer  of  absolute  ownership,  but  it  means 
something  more.  Unquestionably  the  full  and  absolute  owner  and 
holder  of  a  bill  or  note  may  enforce  it,butheisnottheonly  person  who 
can  do  so.  Any  one  who  has  the  legal  or  equitable  title  to  the  instru- 
ment, or  is  its  holder  with  authority  to  bring  an  action  upon  it,  is  a 
transferee  of  title  within  the  meaning  of  the  rule.^^  A  great  many  cases 
go  to  the  extreme  of  saying  that  the  transfer  will  be  effectual,  and 
the  right  of  action  complete,  if  brought  by  a  person  who  has  no  inter- 
est in  a  bill  or  note  whatever.^^     But  this  is  more  than  questionable 

11  Where  a  plaintiff  brings  the  note  declared  on,  and  offers  it  in  evidence, 
this  is  not  only  evidence  that  he  is  the  bearer,  but  also  raises  a  presumption 
of  fact  that  he  is  the  owner,  and  this  will  stand  as  proof  of  title  until  other 
evidence  is  produced  to  control  it.  Ordinarily  such  bearer,  relying  on  the 
general  presumption,  has  no  means  of  proving  the  transfer  to  himself.  Shaw, 
C.  J.,  in  Pettee  v,  Prout,  3  Gray  (Mass.)  502. 

12  Gage  V.  Kendall,  15  Wend.  640.  In  this  case  a  note  was  made  by  Gage 
payable  to  W.  C.  or  bearer,  and  this  was  declared  on  by  K.  as  bearer.  Gage 
offered  to  prove  that  plaintiff  at  the  commencement  of  the  suit,  having  trans- 
ferred his  interest,  had  no  title  or  interest  in  such  note.  Evidence  to  this 
effect  was  rejected  by  the  court.  The  case  was  appealed,  and  the  judgment 
affirmed.  In  Robinson  v.  Crandall,  the  notes  on  which  the  action  was 
brought  were  made  by  defendants,  payable  to  H.  W.  or  bearer.  Upon  death 
of  payee  the  plaintiffs,  his  administrators,  declared  on  the  notes  as  bearers. 
It  was  objected  that,  as  no  assignment  had  been  made,  not  even  the  admin- 
istrators could  maintain  the  action.  It  was  held  that,  being  the  real  owners 
of  the  notes,  they  had  the  right  to  declare  and  recover  as  bearers,  and  that 
it  did  not  lie  with  defendants  to  object  to  the  plaintiffs'  want  of  interest    9 


186  TRANSFER.  [Ch.   & 

law,  and  to  offset  this  sweeping  assertion  it  may  be  said  with  equal 
certainty  that  the  law  is  settled  that  if  a  plaintiff  has  no  interest 
in  or  possession  of  commercial  paper  he  cannot  maintain  an  action 
upon  it.^^  But  if  a  plaintiff  has  possession  of  commercial  paper 
the  question  of  his  being  the  legal  transferee  of  title  does  not  depend 
alone  upon  his  absolute  ownership  of  the  bill  or  note.  He  is  the 
legal  transferee  if,  coupled  with  his  possession,  there  is  in  him  any 
right  of  possession,  irrespective  of  the  fact  that  his  interest  in  the 
instrument  has  or  has  not  value.  If  the  title  and  transfer  are  mere- 
ly colorable,  and  such  as  to  bar  another  action  against  the  defendant 
upon  the  instrument,  it  is  sufficient.^*  The  absolute  owner  may 
lawfully  constitute  any  third  person  the  holder  for  the  purpose  of 
suing  upon  it.  And  the  rights  and  equities  of  the  holder  and  the 
person  bringing  the  action  are  entirely  immaterial  to  the  defend- 
ant or  person  liable,  so  long  as,  in  making  payment  of  the  bill  or 
note,  he  pays  it  once  for  all.^'  The  court  will  not  therefore  in- 
quire into  these  equities  and  find  in  them  a  defense  for  the  person 

Wend.  (N.  Y.)  425.  Mauran  v.  Lamb,  7  Cow.  174;  Hartwell  v.  McBeth.  1 
Har.  (Del.)  303;  Lewis  v.  Hodgdon,  17  Me.  2G7;  Gray  v.  Wood.  2  Har.  & 
J.  (Md.)  328;   Hodges  v.  Holland,  19  Picj^.  43. 

13  In  the  case  of  Emmett  v.  Tottenham,  a  bill  was  indorsed  in  blank  by 
payee  to  one  R..  who  discounted  it,  and  the  bill  was  afterwards  indorsed  by 
R.  to  W.  by  delivery.  Upon  the  death  of  W.  his  executor  desired  R.  to  bring 
suit  in  a  third  party's  name.  At  the  request  of  R.,  E.,  having  copied  the 
bill  and  returned  original  to  the  executor,  brought  suit.  It  was  held  that,  as 
E.  did  not  have  possession  of  the  bill  when  the  trial  began,  he  had  not  title 
to  support  the  action,  for  there  was  no  evidence  that  he  had  any  interest  in 
the  bill.  8  Exch.  884,  Coleman  v.  Biedman,  7  C.  B.  871;  Moore  v.  Maple,  2i> 
111.  341;  Watson  v.  New  England  Bank,  4  Mete.  (Mass.)  343;  Hovey  v. 
Sebring,  24  Mich.  232. 

14  Green  v.  Swink.  9  N.  Y.  St.  Rep.  646. 

15  In  Ord  V.  Portal,  where  indorsees  sued  on  a  bill  drawn  to  the  maker's 
order  and  indorsed  by  him  in  blank,  it  was  objected  that  there  was  no  evi 
dence  that  the  bill  had  been  indorsed  to  the  three  plaintiffs.  It  was  held 
that  an  indorsement  in  blank  conveyed  a  joint  right  of  action  to  as  many 
as  agreed  in  suing  on  the  bill.  3  Camp.  239.  In  Grimes  v.  Piersol,  It  was 
shown  that  Grimes  had  assigned  a  note  to  one  Benton,  and  that  the  latter's 
name  had  been  erased  and  the  name  of  Piersol  inserted.  It  was  held  that 
in  such  a  case,  the  assignee  or  his  vendee  could  not,  without  consent  of  as- 
signor, strike  out  the  name  of  assignee  and  insert  that  of  the  vendee  so  as 
to  enable  the  latter  to  maintain  a  suit  against  the  assignor.    25  Ind.  245. 


Ch.   6]  VALIDITY    BETWEEN    IMMEDIATE    PARTIES.  187 

liable.  They  will  not  ask  in  whom  the  property  of  the  instrument 
may  be,  so  long  as  the  legal  title  is  in  the  holder  who  has  it  in  hia 
possession,  having  a  right  to  it.^*  If  such  person  has  not  its  full 
legal  property,  he  may  nevertheless  recover  as  an  agent  authorized 
to  collect  the  bill  or  note,  and  acquit  the  persons  liable  upon  its  pay- 
ment to  him,  or,  in  other  words,  he  may  recover  as  the  trustee  of 
an  express  trust.^^ 

The  doctrine  thus  laid  down  has  been  complicated  and  confused, 
but  not  substantially  changed,  by  the  enactment  of  the  various 
Codes  to  the  general  effect  that  every  action  must  be  prosecuted  in 
the  name  of  the  real  party  in  interest,  except  that  an  executor,  ad- 
ministrator, or  trustee  of  an  express  trust  may  sue  without  joining 
with  him  the  person  for  whose  benefit  the  action  is  brought.  The 
mere  holder  of  a  bill  or  note,  who  has  no  interest  in  it,  is  clearly 
not  the  real  party  in  interest,  and  cannot  in  the  Code  states  main- 
tain an  action  as  such  upon  it.^*  But  the  courts  have  construed 
this  section  to  mean  that  it  is  still  ordinarily  no  defense  to  a  party 

16  Strong  v.  Tompkins,  the  plaintiff,  who  was  a  deputy  sheriff,  brought 
suit  on  a  promissoi-y  note  indorsed  to  him  and  taken  by  him  instead  of  bail, 
and  by  way  of  indemnity.  Under  the  statute  making  void  all  such  agree- 
ments by  such  officers,  the  plaintiff  was  held  not  to  be  the  legal  holder,  and 
so  not  entitled  to  sue.    8  Johns.  7G. 

17  Law  V.  Pamell,  7  C.  B.  (N.  S.)  282.  In  this  case,  B.,  the  payee,  indorsed 
in  blank  a  bill  to  a  bank.  The  plaintiff,  who  was  the  bank's  manager,  and 
who  was  intrusted  with  care  of  such  security,  brought  suit  against  the  de- 
fendant, who  was  the  acceptor,  and  who  claimed  that  the  suit  should  have 
been  brought  by  all  the  shareholders.  It  was  held  that  the  bank  might  con- 
stitute anyone  the  holder  of  a  note  indorsed  in  blank,  for  the  purpose  of 
suing  upon  it.  7  C.  B.  (N.  S.)  282.  In  Foss  v.  Nutting,  it  was  held  that 
where  an  assignment  without  indorsement,  was  made  of  a  promissory  note, 
payable  to  order,  in  a  state  where  "every  action  must  be  prosecuted  in  the 
name  of  the  real  party  in  interest,"  such  provision  would  not  bar  an  action 
in  another  state  in  the  name  of  the  payee.  14  Gray  (Mass.)  484;  Lovell  v. 
Evertson,  11  Johns.  52;  Haxtun  v.  Bishop,  3  Wend.  13;  Guernsey  v.  Burns, 
25  Wend.  411;  Ancona  v.  Marks,  7  Hurl.  &  N.  GSU;  Jenkins  v.  Tongue,  29 
Law  J.  Exch.  147;  Orr  v.  Lacy,  4  McLean,  243,  Fed.  Cas.  No.  10,589;  French 
V.  Jarvis,  29  Conn.  347;  Laflm  v,  Sherman,  28  111.  391;  La  Coste  v.  De  Armas, 
2  La.  2G3;  Southard  v.  Wilson,  29  Me.  56;  Little  v.  O'Brien,  9  Mass.  423; 
Brigham  v.  Marean,  7  Pick.  40;  Brigham  v.  Gurney,  1  Mich.  349. 

18  Parker  v.  Totten,  10  How.  Prac.  233;  Clark  v.  Phillips,  21  How.  Prac.  87. 


188  TRANSFER.  [Ch.   6 

sued  upon  commercial  paper  to  show  that  the  transfer  under  which 
the  plaintiff  holds  it  is  without  consideration  or  subject  to  equities 
between  him  and  his  assignor,  or  colorable  or  merely  for  the  pur- 
pose of  collection  or  to  secure  a  debt  contracted  by  an  agent  without 
sufficient  authority.  It  is  sufficient  if  the  plaintiff  have  the  legal 
title,  either  by  written  transfer  or  delivery,  whatever  be  the  equities 
between  him  and  his  assignor.  But  he  must  have  the  right  of  pos- 
session, and  ordinarily  be  the  legal  owner.  Such  ownership  may  be 
as  an  equitable  trustee,  or  it  may  have  been  acquired  without  ade- 
quate consideration,  but  it  must  be  sufficient  to  protect  the  defend- 
ant upon  a  recovery  against  him  from  a  subsequent  action  by  the 
assignor.^*  Thus  a  receiver  may  sue,^*^  but  an  agent  to  collect  may 
not,  because  he  has  neither  the  legal  title  nor  is  the  trustee  of  an 
express  trust,- ^  although,  if  the  agent  were  named  as  payee  in  the 
note,  he  would  be  the  trustee  of  an  express  trust.^*^  But  a  donee 
may  sue,  because  the  legal  title  passes  by  gift,  irrespective  of  the 
question  of  consideration;  "^  or  a  person  holding  collaterals  for  the 
benefit  of  creditors,  because  the  legal  title  passes  by  assignment, 
and  he  also  is  a  trustee  of  an  express  trust;  **  and  each  and  all  of 
these  persons  may  legally  discharge  the  liability  of  the  defendants 
upon  the  instrument 

METHODS  OF  TRANSFER. 

86.  There  are  four  methods  of  transfer: 

(a)  By  assignment. 

(b)  By  operation  of  law. 

(c)  By  indorsement. 

(d)  By  delivery. 

19  Hays  V.  Hathorn.  74  N.  Y.  486;  Eaton  v.  Alger,  47  N.  Y.  345;  Webb  v. 
Morgan,  14  Mo.  428;  Boyd  v.  Corbitt.  37  Mich.  52. 

20  Merchants'  Loan  &  Trust  Co.  v.  Clair,  36  Hun,  362. 

21  Iselin  V.  Rowlands,  30  Hun.  488. 

2  2  Hollingsworth  v.  Moulton.  53  Hun.  91,  6  N.  Y.  Supp.  362;  Hoxle  v.  Ken- 
nedy. 10  N.  Y.  St.  Rep.  786. 
2  3  Pritchard  v.  Hirt,  39  Hun.  378. 
2*  Nelson  v.  Edwards,  40  Barb.  279. 


Ch.   6]  METHODS    OF    TRANSFER.  ISO" 


SAME— BY  ASSIGNMENT. 

87.  A  bill  or  note  may  be  transferred  by  assignment 
as  distinguished  from  a  negotiation. 

We  have  already  seen  that  transfers  in  the  form  of  words  com- 
monly used  for  an  assignment  when  written  on  the  bill  or  note  are 
construed  as  indorsements  and  not  as  assignments,  unless  the  inten- 
tion between  the  parties  plainly  is  to  treat  them  as  an  assignment  in 
distinction  from  an  indorsement  See  supra,  pp.  105  to  110.  But 
where  such  form  of  words  is  not  written  on  the  instrument,  but  is 
found  in  a  separate  pajier,  and  from  its  phraseology  is  clearly  meant 
to  transfer  title,  the  plain  intention  of  the  parties  is  enforced  and  the 
title  vests  in  the  transferee  by  operation  of  assignments^  So  where 
a  bUl  or  note  which  can  only  be  transferred  by  indorsement,  is  trans- 
ferred without  indorsement,  yet  with  intention  to  vest  title,  or  where 
a  bill  or  note  indorsed  in  blank  or  payable  to  bearer  is  delivered,  as^ 
we  shall  see  in  the  later  sections  of  this  chapter,  the  title  vests  by 
assignment,  and  is  different  in  its  legal  effects  from  that  passing  on 
indorsement,  or  according  to  the  doctrines  of  negotiability.  And 
this  raises  the  question  of  title  conferred  by  an  assignment.^" 

2B  Examples  are:  An  order  by  the  payee  of  a  note  on  the  maker  to  pay 
over  proceeds  to  some  one,  Noyes  v.  Oilman,  G5  Me.  589;  a  transfer  of  a  note 
or  bill  by  deed,  McClain  v.  Weidemeyer,  25  Mo.  364;  in  assignment  by  a 
separate  writing,  Mori-is  v.  Poillon,  50  Ala.  403;  an  order  by  a  holder  to  his 
collecting  agent  to  pay  over  proceeds,  Gayoso  Sav.  Inst.  v.  Fellows,  6  Cold. 
(Tenn.)  467;  a  bond  by  the  payee  of  a  note  in  which  he  includes  the  note, 
Crosby  v.  Roub,  16  Wis.  645. 

2  6  In  Hodges  v.  Steward,  1  Salk.  125,  "a  difference  was  taken  between  a 
bill  payable  to  J.  S.  or  bearer,  and  J.  S.  or  order;  for  a  bill  payable  to  J.  S. 
or  bearer  is  not  assignable  by  the  contract.  ♦  *  *  But  when  the  bill  is 
payable  to  J.  S.  or  order,  there  an  express  power  is  given  to  the  party  to  as- 
sign, and  the  indorsee  may  maintain  an  action."  The  bearer  of  a  note  pay- 
able to  a  particular  person  or  bearer  cannot  maintain  an  action  thereon  in  his 
own  name  against  the  maker.  Nicholson  v.  Sedgwick,  1  Ld.  Raym.  ISO. 
Before  the  passing  of  the  statute  3  «&  4  Anne,  c.  9,  a  promissory  note  was  not 
assignable  or  indorsable  over  within  the  custom  of  merchants.  Buller  v. 
Crips,  6  Mod.  29.  As  to  whether  inland  bills  only  were  contemplated  by  this 
statute,  see  Milne  v.  Gi'aham.  1  Barn.  &  C.  192.  In  the  case  of  Lodge  v. 
Phelps,  the  question  arose  as  to  whether  the  assignee  of  a  promissory  note 


190  TRANSFER.  [Ch.   6 

The  assignment  of  an  ordinary  contract  right  means  that  the  party 
holding  the  right  drops  out  of  the  contract  and  another  talies  his 
place.  Tlie  assignee  is  substituted  in  place  of  the  assignor.  And 
that  the  student  may  better  understand  the  matter,  we  will  say 
that  the  assignee,  and  every  subsequent  person  to  whom  the  con- 
tract comes  by  assignment,  may  be  considered  as  the  person  who 
made  the  contract  in  the  first  instance,  and  as  having  said  and 
done  everything  in  making  the  contract  which  the  original  assignor 
said  or  did.  Hence  if  the  original  assignor  said  or  did  something 
which  under  the  ordinary  law  of  contracts  would  prevent  him  from 
enforcing  the  contract,  or  asserting  his  right  against  the  other 
party  to  the  original  contract,  the  assignee,  although  he  knows  noth- 
ing of  the  original  transaction,  may  be  deemed  to  have  said  and  done 
the  same  things.  And  further,  if  any  subsequent  assignee  from 
whom,  as  an  assignor,  the  holder  in  turn  derives  the  contract,  has 
done  anything  to  prevent  its  enforcement  against  the  original  party, 
the  last  holder  cannot  enforce  it  against  the  original  party.  Each 
assignee  takes  his  chances  as  to  the  exact  position  in  which  any  party 
making  an  assignment  of  it  stands.^^  And  as  it  is  called  in  law,  the 
assignee  takes  the  contract  subject  to  equities.  By  this  is  meant 
a  set-off,'^  or  a  fraud,^®  or  any  defense  to  the  contract  which  would 
avail  in  favor  of  the  original  party  up  to  the  time  of  the  notice  of 
the  assignment  given  to  the  person  against  whom  the  contract  is 
sought  to  be  enforced.     A  subsequent  indorsement  also  cuts  off  these 

given  in  Connecticut,  where  such  assignee  could  not  maintain  an  action  in 
bis  own  name,  might  so  maintain  such  action  in  New  York.  It  was  held  that 
the  action  might  be  brought  in  the  assignee's  own  name,  but  allowing  the  de- 
fendant eveiT  defense  to  which  he  would  have  been  entitled  in  New  York. 
2  Caines,  Cas.  321. 

27  Crouch  V.  Credit  Foncier,  L.  R.  8  Q.  B.  3SG;  Mangles  v.  Dixon,  3  H.  L. 
Cas.  735;  Littlefield  v.  Bank,  97  N.  Y.  581;  Callanan  v.  Edwards,  32  N.  Y. 
483;  Kleeman  v.  Frisbie,  63  111.  482;  Willis  v.  Trambly,  13  Mass.  204;  Spin- 
ning V.  Sullivan.  48  Mich.  5,  11  N.  W.  758;  Lane  v.  Smith,  103  Pa.  St.  415; 
Shade  v.  Creviston,  93  Ind.  591;  Warner  v.  Whittaker,  6  Mich.  133. 

2  8  Zabriskie  v.  Railroad  Co.,  131  N.  Y.  72,  29  N.  E.  lOOG;  Wood  v.  Mayor, 
etc.,  of  New  York,  73  N,  Y.  556;  Massachusetts  Loan  &  Trust  Co,  v.  Welch, 
47  Minn.  183.  49  N.  W.  740;  McKenna  v.  Kirk  wood,  50  Mich.  544,  15  N.  W. 
898. 

20  Graham  v.  Johnson,  38  Law  J.  Ch.  374;  ilulbrook  v.  Burt,  22  Pick 
aiass.)  546. 


€h.   6]  METHODS    OF   TRANSFER.  19] 

equities,  as  appears  by  the  rule  set  forth  further  on,  that  when  an 
indorsement  is  subsequently  made  on  an  assigned  negotiable  instru- 
ment, all  defenses  are  cut  off  from  the  time  of  the  indorsement. 
For  the  chief  difference  between  an  assignment  and  a  negotiation 
is,  as  already  explained  (see  supra,  pp.  8  to  13),  that  the  nego- 
tiable contract  can  be  enforced  by  the  transferee,  without  previous 
notice  to  the  contractor,  and  without  the  risk  of  being  met  by  de- 
fenses which  would  have  been  good  against  the  assignor. 

SAME— BY  OPERATION  OF  LAW 

88.  The  full  title  to  a  bill  or  note  passes  -without  either 
assignment,  indorsement,  or  delivery  by  operation  of  la^w, 
and  either  by 

(a)  The  death  of  the  holder,  -where  the  title  vests  in  his 

personal  representative,  or 

(b)  The  bankruptcy  of  the  holder,  -where  the  title  vests 

in  his  assignee,  or 

(c)  In  some  jurisdictions,  -where  the   holder  is  an  un- 

married -woman,  on  her  subsequent  marriage  the 
title  vests  in  her  husband,  or 

(d)  In   some   jurisdictions   the   title   to  a   bill   or  note 

transferred  to  a    married   -woman   vests  in    her 
husband,  or 

(e)  Upon  the  death  of  a  joint  payee   or  indorsee  the 

title  vests  at  once  in  the  survivor  or  survivors. 

By  "operation  of  law"  is  meant  that  in  the  cases  above  specified 
the  law  implies  a  transfer  where  there  is  none  by  act  of  the  parties. 
The  rules  of  law  themselves  operate  as  the  transfer.  The  position, 
rights  and  liabilities  of  the  executor,  administrator  and  trustee  have 
been  already  suflBciently  explained.  The  position,  rights  and  lia- 
bilities of  an  assignee  in  bankruptcy  are  similar  to  theirs  because  in 
most  respects  he  is  but  an  ordinary  trustee.  As  regards  the  posi- 
tion of  married  women  at  common  law,  there  is  not  much  to  be  said, 
because  in  England  and  in  almost  all  our  states  the  common  law  has 


192  TRANSFER.  [Ch.   Cy 

been  abrogated  by  statutes  abolishing  most  of  the  old  rules.  These 
rules  were  that  at  common  law  a  married  woman,  though  she  might 
have  contracted  as  feme  sole,  was  nevertheless  by  marriage  disa- 
bled from  acquiring  the  benefits  under  the  contract.  These  be- 
longed conditionally  to  her  husband.  If  he  reduced  them  to  posses- 
sion, they  were  his  absolutely.  If  he  did  not  reduce  them  to  pos- 
session, on  his  death  they  survived  to  her  if  alive,  but,  if  dead,  to  her 
representatives.  These  rules  were  operative  in  case  of  bills  and 
notes  whether  made  payable  to  or  indorsed  to  a  married  woman. 
And  during  the  marriage,  the  husband  was  for  all  purposes  deemed 
to  be  the  holder  of  the  instrument  payable  to  the  order  of  the  wife, 
whether  it  was  made  payable  to  her  before  or  after  marriage.  A? 
regards  the  joint  payee  or  indorsee,  the  rule  stated  in  the  text  is  th<» 
statement  of  the  contract  rule  of  survivorship,  perhaps  the  principal 
characteristic  of  the  doctrine  of  joint  right.  By  this  is  meant  that 
the  order  in  the  bill  or  indorsement  and  the  promise  in  the  note  is 
made  to  all  the  promisees,  not  as  separate  individuals,  but  as  one 
legal  entity.  We  may  liken  them  in  their  being  but  one  party  in 
ownership  to  a  corporation  which  may  be  composed  of  many  indi- 
viduals, yet  acts  as  one,  and  which  in  case  of  the  death  of  some  of 
its  members  still  exists  and  acts  through  the  survivors.  So  with 
joint  payees  or  indorsees,  the  right  does  not  descend  to  representa- 
tives, but  passes  on  or  is  transferred  to  the  survivors,  who  have  the 
title  to  it  and  are  entitled  to  enforce  it. 

The  title  in  all  these  cases  received  by  the  transferee,  is  only  that 
held  by  the  transferror,  because  this  devolution  of  interest  by  opera- 
tion of  law  is  but  an  assignment  of  that  interest.  The  executor, 
administrator  and  assignee  in  bankruptcy  merely  stand  in  the  place 
of  the  original  owner  and  can  have  no  better  position  than  he  had.^- 
They  pay  nothing  for  the  paper,  neither  do  they  take  it  in  any  com- 
mercial transaction,  but  it  comes  to  them  as  part  of  the  holder's  prop- 
erty, to  be  collected  and  paid  over  to  the  creditors  of  the  holder  or 
persons  entitled  to  it.  And  this  also  is  the  principle  governing  in 
the  reduction  to  possession  by  a  husband  of  the  choses  in  action  of  a 
wife,^^  and  in  the  case  of  the  survivor  of  joint  owners.** 

8  2  Billings  V.  Collins,  44  Me.  271. 

3  3  Daniel,  Neg.  Inst.  §§  257,  258. 

34  Daniel.  Neg.  Inst.  §§  1182,  1183,  llS.'ia. 


Ch.    6]  METHODS    OF    TRANSFER.  19i 


SAME— BY  INDORSEMENT. 

89.  The  legal  title  to  an  instrument  made  payable  to 
order   can  regularly  be  transferred  only  by  indorsement. 

90.  The  transferee  of  an  instrument  made  payable  to 
order  without  indorsement  is  the  equitable  o^wner,  and 
takes  it  subject  to  all  the  equities  vested  in  prior  parties. 

The  facts  which  determine  whether  or  not  the  instrument  is  to 
be  transferred  by  indorsement  are  the  terms  of  the  face  of  the 
instrument.  If  the  instrument  be  to  order,  then  it  was  in  contem- 
plation of  the  parties  that  the  money  called  for  was  to  be  paid 
to  the  payee,  or  to  some  person  to  whom  he  would  direct  it  to  be 
paid.^''  It  would  be  a  violation  of  the  terms  of  the  contract  to 
pay  it  otherwise.  For"  the  meaning  of  the  words  "or  order"  is  that 
the  original  parties  intended  in  the  first  place  that  the  instrument 
should  pass  from  the  payee  to  some  person,  they  did  not  know 
whom,  and  on  again  from  him  to  another,  who  in  turn  should  trans- 
fer it.  They  therefore  may  be  deemed  to  promise  to  pay  its  amount 
to  any  one  whatever,  provided  only  that  such  person  can  show  an 
order  for  its  payment.  And  thus,  as  we  have  seen  (see  ante,  p. 
105),  it  is  immaterial  whether  the  indorsement  contains  words  of 
negotiability  or  not.^®  But  the  only  method  by  which  this  order 
can  be  evidenced  is  an  indorsement,^^  although  the  indorsement 
may  have  various  forms,  and  be  made  sometimes  by  the  payee  or 

8  8  Cock  V.  Fellows,  7  Johns.  143;  Hedges  v.  Sealy,  9  Barb.  214.  A  note  by 
R.  B.  &  A.  G.,  payable  to  J.  B..  was  indorsed  thus:  "Pay  the  within  to  J. 
R.  [Signed]  J.  B."  It  was  held  that  the  legal  ownership  of  the  note  was  not 
transferred  to  J.  R.  by  this  indorsement,  so  as  to  authorize  him  to  maintain 
a  suit  upon  the  note  in  his  own  name  against  the  makers.  Robinson  v. 
Brown,  4  Blackf.  (Ind.)  12S. 

8  6  More  V.  Manning,  Comyns,  311;  Edie  v.  East  India  Co.,  1  Wm.  Bl.  205, 
2  Burrows,  121G;   Leavitt  v.  Putnam,  3  N.  Y.  494. 

8  7  In  the  case  of  Bryant  v.  Eastman,  where  one  who  was  carrying  on  busi- 
ness for  himself,  but  in  the  name  of  a  company  which  liad  not  been  organ- 
ized, though  incorporated,  received  as  payment  for  a  debt  due  him  in  such 
business  a  note  payable  to  the  order  of  the  company;  it  was  held  that  such 
person  might  transfer  the  note  by  indorsing  it  iu  his  own  name.  7  Gush. 
NEG.  BILLS 13 


194  TRANSFER.  [Ch.  6 

indorsee  and  sometimes  by  persons  upon  wliom  their  interests  de- 
volve.'* And  tlie  words  or  order  are  construed  as  an  express  power 
given  the  payee  to  assign  only  in  case  the  payee  evidences  his  as- 
sent to  the  transfer  by  his  indorsement.'® 

There  is  a  large  class  of  cases  where,  through  accident,  forget- 
fulness,  mistake,  or  some  other  cause,  a  negotiable  instrument  is 
transferred  in  good  faith,  but  without  the  indorsement  of  the  per- 

(Mass.)  111.  Warder,  Busbuell  &  Glessner  Co.  v.  Gibbs,  92  Mich.  29.  52  N. 
W.  73;  Rand.  Com.  Paper,  §  700;  Byles,  Bills  &  N.  pp.  2,  151;  Daniel,  Neg. 
Inst.  §§  Gti3,  G64. 

38  The  various  forms  are  arranged  as  follows:  (1)  If  payable  to  A,  A  must 
indorse.  (2)  If  payable  to  A,  and  he  is  dead,  B,  as  executor  of  A,  must  sign. 
Thus,  in  the  case  of  Stone  v.  Rawlinson,  it  was  held  that  the  executor  or  ad- 
ministrator of  a  person  to  whom  or  whose  order  a  bill  is  payable  has  the  ab- 
solute propeiiy  in  such  bill,  and  may  assign  it  to  whomsoever  he  pleases, 
and  such  assignee  may  maintain  an  action  in  his  own  name.  Willes,  559. 
(3)  If  payable  to  A,  and  he  is  bankrupt,  B,  as  assignee  of  A,  must  sign.  Thus, 
in  "Wallace  v.  Hardacre,  the  defendant  accepted  a  bill,  drawn  by  E.  M.,  and 
by  him  indorsed  to  the  plaintiff.  It  was  claimed  as  defense  that  E.  M.  was 
bankrupt  before  delivery  of  bill  to  plaintiff,  and  could  convey  no  interest.  It 
was  held  that  the  bill  was  available  in  the  hands  of  a  holder  for  value,  and 
the  defense  was  not  good  against  him,  though  it  might  have  been  as  against 
an  orginal  party.  1  Camp.  45.  (4)  If  payable  to  A,  B,  C,  and  D,  executors 
of  A,  all  must  sign.  (5)  If  payable  to  A,  wife  of  B,  B  must  sign.  Thus,  a 
note  was  made  payable  to  "Mrs.  Carter  or  order,"  and  was  indorsed  by  her 
in  the  name  of  "M.  Carter."  It  was  held,  in  an  action  by  the  indorsee,  that 
in  case  of  such  a  note,  indorsed  by  a  maiTied  woman  in  her  own  name, 
where  the  maker  afterwards  promises  to  pay,  it  will  be  presimaed  that  the 
nominal  payee  had  authority  from  her  husband  to  indorse  in  such  form,  and 
a  legal  title  will  be  invested  in  the  plaintiff.  Cotes  v.  Davis,  1  Camp.  485.  In 
Mason  v.  Morgan,  a  note  was  made  by  the  defendant  to  a  married  woman, 
and  it  was  indorsed  to  the  plaintiff  by  the  husband  alone.  Such  indorsement 
was  held  sufficient  where  the  one  taking  such  an  instrument  had  satisfied 
himself  that  he  took  from  the  actual  owner.  2  Adol.  &  E.  30.  (6)  If  payable 
to  A,  B,  C,  and  D,  a  copartnership,  any  member  by  the  firm  name  may  sign. 
Thus,  a  note  was  made  payable  to  E.  &  R.  or  order,  was  indorsed  by  R.  in  his 
own  name  to  his  partner  E.  It  was  held  that  the  indorsement  should  have 
been  in  the  partnership  name.  Estabrook  v.  Smith,  6  Gray  (Mass.)  570.  (7) 
If  payable  to  A,  B,  C,  and  D,  not  pajtnei-s,  all  must  sign.  Thus,  a  bill  pay- 
able to  father  and  son,  not  partners,  was  indorsed  by  the  son  alone.  Such  in- 
dorsement was  held  not  good,  as  both  jpayees  should  have  indorsed.  Carrick 
V.  Vickery,  2  Doug.  653n. 

89  Nicholson  v.  Sedgwick,  1  Ld.  Raym.  180;  Hodges  v.  Steward,  1  Salk.  125. 


Ch.   6]  METHODS    OF    TRANSFER.  195 

son  to  whose  order  it  is  made.  It  is  true  that  an  indorsement  of 
an  instrument  and  an  assignment  of  it  such  as  we  have  been  en- 
deavoring to  explain  are  widely  distinct.  But  the  statute  of  Anne, 
while  it  distinguishes  between  them,  recognizes  the  latter  method 
as  one  competent  to  transfer  the  instrument  itself.*''  For  the  in- 
strument, while  it  can  only  be  negotiated  by  indorsement,  is  none  the 
less  assignable  as  a  chose  in  action.  Its  very  terms,  which  make 
it  payable  to  order,  make  it  also  assignable,  with  the  difference 
that  an  indorsement  is  a  negotiation,  and  carries  with  it  the  full, 
legal  title,  and  the  assignment  carries  with  it  only  the  equitable 
one.*^  And  it  was  the  doctrine  of  the  courts  of  equity,  as  distinct 
from  those  of  the  common  law,  that,  inasmuch  as  property  in  equity 
could  be  assigned  without  a  writing,*'^  and  merely  by  delivery,  with 
an  oral  agreement  and  an  intent  to  assign,  therefore  a  court  of 
equity  would  treat  a  delivery  of  the  bill  or  note  payable  to  order, 
without  indorsement,  as  an  assignment  of  it,  or  a  transfer  of  the 
title  of  the  bill  or  the  note  and  all  interest  in  it.  And  because  it 
was  only  the  courts  of  equity  which  would  treat  it  as  such  an  assign- 
ee Watkins  v.  Maiile,  2  Jac.  &  W.  237.  In  this  case  an  accommodation  no'te, 
payable  to  R.  S.  or  order,  was  drawn  and  signed  by  H.  R.  S.  sent  this  note 
to  D.,  T.  &  Co.,  to  secure  advances  made  to  him,  without  Indorsing  it.  The 
note  was  paid  by  H.'s  banli,  but  on  his  objection,  D.,  T.  &  Co.  returned  the 
money,  on  a  promise  by  H.  that  if  certain  mortgages  on  property  of  B.  S., 
held  by  D.,  T.  &  Co.,  were  insufficient,  he  would  pay.  The  estates  were  not 
sufficient,  and  R.  S.  became  bankrupt  On  suit,  being  brought,  H.  agreed 
to  execute  bond,  but,  before  doing  so,  died.  E.  D.,  of  D.,  T.  &  Co.,  as  admin- 
istrator of  R.  S.,  indorsed  note  to  his  own  firm,  and  H.'s  repx*esentatives  were 
sued.  It  was  held  that,  as  the  equitable  interest  had  passed  by  delivery,  the 
holders  might  have  called  upon  the  bankrupt  to  indorse,  and  that  the  formal 
act  of  indorsement  by  the  administrator  was  proper.  Compare  with  this  the 
case  of  Edge  v.  Bumford,  where  a  bill  was  drawn  by  R.  and  accepted  by  de- 
fendant R.  gave  the  bill,  without  indorsement,  to  the  plaintiff.  Upon  its 
return  to  R.  by  the  plaintiffs  to  be  indorsed,  he  bwrned  the  bill..  R.  becoming 
bankrupt,  the  defendant  refused  to  pay,  and  suit  was  brought  against  him. 
It  was  held  that  such  a  bill  could  not  be  maintained,  as  equity  could  do  no 
more  than  to  entertain  a  bill  to  compel  indorsement,  but,  as  in  this  case  that 
would  have  been  of  no  effect,  there  was  no  remedy.  31  Law  J.  Ch.  805;  Har- 
rop  V.  Fisher,  9  Wkly.  Rep.  667,  10  C.  B.  (N.  S.)  196. 

41  Freund  v.  Importera'  &  Traders'  Nat  Bank,  76  N.  Y.  352;   U.  S.  v.  White, 
2  Hill,  59. 

42  Briggs  V.  Dorr,  19  Johns.  93. 


19G  TRANSFER.  [Cll.   G 

ment,  and  vest  the  interest  and  right  to  the  bill  or  note  in  the 
transferee,  therefore  a  corresponding  equity  would  admit  of  reasons 
or  defenses  to  show  w^hy  the  bill  or  note  should  not  be  paid." 
Hence  the  doctrine  that  a  transferee  of  a  note  made  payable  to  order 
without  indorsement  takes  it  subject  to  all  equities  attached  to  the 
note;**  and  this  although  the  bill  be  subsequently  ratified  and  in 
other  respects  the  holder  was  a  bona  fide  holder  for  value.  This 
doctrine  only  goes  to  this  limit  that  equities  are  admitted.  The 
transferee  stands  in  the  position  of  an  assignee.  He  owns  the  note. 
He,  in  turn,  may  transfer  it,  but  he  owns  it  and  transfers  it  subject 
to  the  rules  applicable  in  case  of  an  assignment  of.  any  other  chose 
in  action. 

But  it  would  not  be  just  in  all  cases  to  apply  this  doctrine,  and 
accordingly  we  find  that  equity  has  modified  it.  It  might  be  that 
it  was  intended  to  indorse  it  at  the  time  of  transfer,  but  through 
accident  or  mistake  the  indorsement  was  omitted.  It  might  be 
that  indorsement  was  promised  at  some  future  time,  or  that  an 
indorsement  was  made  after  transfer  and  after  equities  had  ac- 
crued. In  such  cases  it  seems  to  be  a  legitimate  inference  from 
the  leading  case  on  the  subject  ^'^  that  if  it  was  intended  to  indorse 
the  instrument  at  the  time  of  transfer,  and  the  holder  was  in  other 
respects  a  purchaser  for  value  without  notice  before  maturity, 
equity  will  consider  as  done  that  which  ought  to  have  been  done, 
and  treat  the  indorsement  as  merely  a  formal  act  and  the  trans- 
ferror as  bound  to  substantiate  the  right  of  the  transferee.  The 
indorsement  once  made,  equity  will  consider  it  as  valid  as  if  in- 
dorsed at  first,*°  and  treat  the  equities  as  shut  off,  because  in  view 
of  equity  the  indorsement  was  made  at  the  time  of  transfer.*^  As 
it  is  commonly  phrased,  the  subsequent  indorsement  relates  back 

43  Muller  V.  Pondir,  55  N.  Y.  325;  Savage  v.  King,  17  Me.  301;  Calder  v. 
Billington,  15  Me.  398;    Southard  v.  Porter,  43  N.  H.  379. 

44  Hedges  v.  Sealy,  9  Barb.  214;  Goshen  Nat  Bank  v.  Bingham,  US  N.  Y. 
349,  23  N.  E.  ISO;  Lancaster  Nat  Bank  v.  Taylor,  100  Mass.  18;  Clark  v. 
Callison,  7  111.  App.  2G3;  Haskell  v.  Mitchell,  53  Me.  4GS;  Clark  v.  Whitaker, 
50  N.  H.  474;  Trust  Co.  v.  National  Bank,  101  U.  S.  GS;  Osgood  v.  Artt.  17 
Fed.  575. 

45  Watkins  v.  Maule,  2  Jae.  &  W.  237. 

46  Anon.,  1  Camp.  492,  note. 

47  Southard  v.  Porter,  43  N.  H.  380;   Haskell  v.  Mitchell,  53  Me,  4G8. 


Cll.   6]  METHODS    OF    TRANSFER.  197 

to  the  time  of  transfer,  and  tbe  holder  stands  as  a  purchaser  for 
value  without  notice.  But  the  reason  of  this  rule  fails  where  there 
was  no  promise  to  indorse  at  the  time  of  transfer,*^  or  where  the 
purchaser  is  not  one  before  maturity/*  or  where  it  attempted  to 
ratify  an  indorsement  made  by  an  agent  without  authority,'*"  or, 
generally  speaking,  in  any  case  where  the  equities  have  accrued 
prior  to  the  time  of  the  promised  indorsement,  except  those  prior 
to  transfer,  where  indorsement  was  intended  at  the  time  of  trans- 
fer. In  such  cases  the  equities  are  against  the  transferee,  be- 
cause, the  transfer  in  the  first  instance  being  an  assignment,  the 
equities  are  equal,  and  thus  the  rule  obtains  that  he  who  is  first 
in  point  of  time  will  secure  the  advantage.  There  is  no  element 
of  promise  present  to  constitute,  as  in  other  cases,  a  superior  equity, 
and  therefore  the  equities  of  those  possessing  defenses  will  prevail 
against  the  indorsee  by  an  indorsement  subsequent  to  the  transfer, 
and  be  admitted  against  him  when  he  seeks  to  enforce  the  instru- 
ment 

SAME— BY  DELIVERY. 

91.  When  the  note  or  bill  is  made  or  becomes  payable 
to  bearer,  it  is  transferable  by  delivery  without  indorse- 
ment 

A  note  payable  to  bearer  and  an  indorsement  in  blank  are,  in 
legal  effect,  the  same.  The  contract  in  the  case  of  the  note  paya- 
ble to  bearer  imports  that  the  maker  or  acceptor  is  willing  to  pay 
any  one  who  may  have  it  in  his  possession.  The  indorsement  in 
blank  signifies  the  same  thing  with  regard  to  an  indorser  making 
it^^     And  the  holder  of  both  an  instrument  payable  to  bearer  and 

4  8  Lancaster  Nat.  Bank  v.  Taylor,  100  Mass.  24;   Clark  v.  Whitaker,  50  N. 
H.  474. 
40  Haskell  v.  Mitchell,  53  Me.  4G& 

60  Gilbert  v.  Sharp,  2  Lans.  412. 

61  See.  supra,  p.  110.  In  Smith  v.  Clarke,  Peake,  295,  it  was  held  that, 
when  the  payee  of  a  bill  of  exchange  has  made  an  indorsement  in  blank 
thereon,  no  subsequent  indorsee  can  restrain  its  negotiability  by  a  special  in- 
dorsement. By  the  law  of  France  an  indorsement  in  blank  does  not  trans- 
fer any  property  in  a  bill  of  exchange.    Ti-imbey  v.  Vigniei-,  1  Bing.  N.  C.  151. 


198  TRANSFER.  [Ch.   6 

one  indorsed  in  blank  may  transfer  the  instrument  without  in- 
dorsement.^^  Such  a  transfer  is  not  wholly  a  negotiation,  but  is 
more  in  the  nature  of  an  assignment.  By  this  is  meant  only  to  say 
that  it  transfers  the  legal  title  to  the  instrument,  but  except  in 
case  of  the  waranties  already  specified  (see  supra,  p.  159)  it  im- 
poses no  liability  upon  the  transferror;  for  bills  made  payable  to 
bearer  are  negotiable  at  common  law,  and  notes  so  made  payable  are 
recognized  by  the  statute  of  Anne;  "  and  bills  or  notes  to  pay  A 
or  bearer  are  interpreted  to  be  contracts  to  pay  the  person  so  men- 
tioned, or  the  person  to  whom  he  may  deliver  the  instrument.  The 
phrase  'Tbearer"  is  a  descriptio  personse  for  the  legal  possessor,"* 
and  the  transfer  of  title  according  to  the  terms  of  the  original  in- 
strument is  therefore  predicated  upon  deliveiy  alone.  "The  court," 
says  ]\Ir.  Daniel,^^  "treats  notes  payable  to  bearer  as  if  there  were 
a  direct  line  of  contract  between  the  maker  and  the  holder,  by 
whatever  successive  stages  of  transfer  he  may  have  derived  it;  and 
it  is  correct  to  hold  the  maker  in  direct  contract  with  him,  pro- 
vided he  becomes  the  bearer  bona  fide.  He  need  not  trace  title 
through  his  predecessors,  as  possession  is  presumptive  evidence  of 
his  right."  But  it  is  evidently  the  intention  of  the  courts  to  con- 
strue this  contract  subject  to  the  implied  condition  that  the  maker 
or  acceptor  will  pay  only  the  bona  fide  possessor.  In  other  words, 
the  original  parties  may  be  deemed  to  say,  ^'We  will  not  restrict  the 
payment  of  this  instrument  to  any  particular  person,  but  will  pay 
it  to  anybody, ^^  provided  such  person  be  the  bona  fide  holder."  They 
therefore  may  be  deemed  to  contract  that  the  instrument  may  be 

62  Bitzer  v.  Wagar,  83  Mich.  223,  47  N.  W.  210. 

63  In  De  La  Chaumette  v.  Bank  of  England  it  appeared  tliat  a  certain  bank 
note  had  been  stolen,  and  afterwards  came  into  the  possession  of  a  party  in 
France,  who,  in  the  course  of  business,  sent  the  same  to  England.  By  the 
desire  of  the  one  from  whom  the  note  had  been  stolen,  it  was  converted  by 
the  bank.  In  an  action  of  trover,  it  was  decided  that  by  the  statute  of  Anne 
such  notes  were  negotiable,  just  as  were  inland  bills,  and  thus  delivery  to  a 
bona  fide  holder  for  considei^ation  gave  a  good  title  as  against  original  holder. 
2  Bam.  &  Adol.  385. 

64  Grant  v.  Vaughan,  3  Burrows,  1516. 
66  Daniel,  Neg.  Inst,  footnote  to  §  729. 

66  Bank  of  Kentucky  v.  Wister,  2  Pet.  318;  Town  of  Tliompson  v.  Perrine, 
lOG  U.  S.  593,  1  Sup.  Ct.  5G4,  5G8;  Thomson  v.  Lee  Co.,  3  Wall.  327. 


Ch.   6]  OVERDUE    PAPER.  199 

transferred  subject  to  the  rights  and  immunities  of  the  transfer  of 
an  instrument  transferred  by  negotiation,  and  that  the  transferee 
should  have  rights  of  an  indorsee  for  value  and  without  notice,  so 
far  as  the  admission  of  equities  is  concerned.^^  And  the  only  differ- 
ence between  the  transferror  by  delivery  and  the  indorser  is  that  the 
transferror  declines  to  obligate  himself  to  the  liabilities  of  an  in- 
dorser by  declining  to  indorse,  and  the  transferee  relies  on  the  in- 
strument itself  by  not  requiring  an  indorsement.  The  transferror, 
unless  he  violates  an  implied  warranty,  cannot  therefore  be  com- 
pelled to  refund  the  money  for  which  he  sold  the  bill  or  note  if  it 
prove  uncollectible.  Of  this  fact  the  transferee  takes  the  risk  on 
himself,^*  for  he  might,  by  requiring  an  indorsement,  acquire  all 
the  right  acquired  by  negotiation.^®  But  in  other  respects  he  de- 
rives the  benefit  of  all  the  rights  his  transferror  or  prior  parties  have 
acquired;  he  derives  any  benefit  that  may  come  from  a  purchase  in 
due  course  for  value  and  without  notice,  and  thus  is  freed  from 
liability  to  defenses.®" 

OVERDUE  PAPER. 

93.  Negotiable  paper  may  be  transferred  by  indorsement 
or  delivery  -when  overdue. 

A  bill  or  note  does  not  lose  its  negotiability  by  dishonor;'^  and 
yet,  by  a  curious  anomaly  as  regards  parties  prior  to  the  transfer, 

67  City  of  Lexington  v.  Butler,  14  Wall.  293;  Moran  v.  Commissioners  of 
Miami  Co.,  2  Black,  722;  Mercer  Co.  v.  Racket,  1  Wall.  83;  James  v.  Chal- 
mers, 6  N.  Y.  209;  Beach  v.  Wise,  1  Hill,  612;  Bedell  v.  Carll,  33  N.  Y.  581. 

0  8  Fenn  r.  Han-isou,  3  Term  R.  759;  Fydell  v.  Clark,  1  Esp.  447;  Emly  v. 
Lye,  15  East,  7;  Bank  of  England  v.  Newman,  1  Ld.  Raym.  442.  In  this 
case  it  was  held  that:  "If  a  man  has  a  bill  payable  to  him  or  bearer,  and 
delivers  it  over  for  money  received,  without  indorsement  of  it,  this  is  a  plain 
sale  of  the  bill,  and  he  who  sells  it  does  not  become  a  new  security;  but,  if 
he  had  indorsed  it,  he  had  become  a  new  security,  and  then  he  had  been  lia- 
ble upon  the  indorsement."    Holt,  C.  J. 

69  Bigelow  V.  Colton.  13  Gray,  309. 

«o  Miller  v.  Race,  1  Burrows.  452;  Mauran  v.  Lamb,  7  Cow.  174;  Grant  v. 
Vaughan,  3  Burrows,  1516.  See,  also,  Daniel,  Neg.  Inst  §  814,  and  cases 
quoted;  also  section  4,  c.  37,  §  1191  et  seq. 

61  In  the  case  of  Leavitt  v.  Putnam  it  was  held  that,  if  originally  negotia- 
ble, a  bill  or  note  does  not  lose  such  chai-acter  by  being  dishonored,  but  may 


200  TRANSFER.  [Ch.  G 

many  of  the  privileges  of  a  bona  fide  holder  who  receives  the  paper 
after  maturity  are  destroyed.'^  Defenses  of  payment,  of  fraud,  of 
illegality  and  failure  of  consideration,^^  in  favor  of  the  original  par- 
ties, may  be  successfully  interposed  in  an  action  on  a  bill  or  note 
brought  by  the  transferee  of  overdue  paper  when  they  would  have 
availed  against  his  transferror.  As  Professor  Amos  points  out,  a 
negotiable  instrument  overdue  becomes  a  mere  chose  in  action  or 
ordinary  contract. 

There  are  some  things  to  be  noted  concerning  overdue  paper  view- 
ed as  a  chose  in  action.     Prominent  among  these  is  the  fact  that  it 

still  pass  from  hand  to  hand  ad  infinitum  until  paid  by  the  drawer.  The 
indorser,  after  maturity,  writes  in  the  same  form,  and  is  bound  only  upon 
the  same  conditions  of  demand  upon  the  drawer  and  notice  of  nonpayment, 
as  any  other  indorser.  Thus,  the  paper  retains  the  main  attributes  of  a 
proper  bill  or  note.  Hurlbut,  J.,  in  Leavitt  v.  Putnam,  3  Comst.  (N.  Y.)  494. 
In  Deuters  v.  Townsend  it  was  held  that  a  bill  was  assignable  after  ma- 
turity, and  even  after  an  action  had  been  begun  upon  the  same,  5  Best  &  S. 
613.  In  Ames  v.  Meriam  it  was  decided  that  the  rule  controlling  bills  or 
promissory  notes,  with  respect  to  equities  attaching,  does  not  apply  to 
checks  on  a  bank,  taken  within  a  short  time  after  their  date.  Although  pay- 
able on  demand,  they  are  not  treated  as  being  dishonored  or  overdue  on  the 
day,  or  immediately  after  the  day,  of  their  date.  In  this  case  it  was  held 
that  a  note  dated  Januaiy  2d  and  delivered  to  a  person  on  January  12th  was 
not  an  overdue  note  and  subject  to  defenses  between  original  parties.  98 
Mass.  294;  Bassenhorst  v.  Wilby,  45  Ohio  St.  333,  13  N.  E.  75;  Id.,  Johns. 
Cas.  Bills  &  N.  45;   Carpenter  v.  Greenop,  74  Mich.  664,  42  N.  W.  276. 

62  McCaffrey  v.  Dustin,  43  111.  App.  34,  Johns.  Cas.  Bills  &  N.  144. 

63  See  collated  cases,  footnote  to  1  Ames,  Bills  &  N.  p.  743.  In  Brown  v. 
Davies  it  was  held  that  an  overdue  note  taken  with  notes  for  nonpayment 
on  it  was  subject  to  the  defense  of  payment  by  the  maker,  on  the  ground 
that  its  being  so  noted  for  nonpayment  when  the  plaintiff  received  it  should 
have  put  him  on  inquiry.  3  Term  R.  80.  It  was  held  in  Crossley  v.  Horn 
that  the  plaintiff,  by  taking  a  note  after  dishonor,  took  subject  to  infirmities 
and  defenses  between  previous  parties.  13  East.  498.  In  Burrough  v.  Moss 
it  was  decided  that  the  indorser  of  overdue  bills  or  notes  is  liable  only  to 
equities  attaching  on  the  paper  itself,  and  not  to  claims  such  as  may  arise 
from  collateral  matters.  10  Barn.  &  C.  558.  In  Ashurst  v.  Royal  Bank  of 
Australia  it  was  held  that  where  a  note  was  indorsed  by  one  who  was  bank- 
rupt at  the  time,  and  when  overdue,  the  indorsee  takes  no  better  title  than 
that  of  his  transfeiTor.  27  Law  T.  168;  Howard  v.  Ames,  3  Mete.  (Mass.) 
308;  Bond  v.  Fitzpati-ick,  4  Gray  (Mass.)  89;  Fish  v.  French.  15  Gray  (Mass.) 
520. 


Ch.   6]  OVERDUE    PAPER.  201 

is  transferred  by  indorsement,  and  not  by  assignment'*  The  rea- 
fson  for  this  is  that  the  parties  to  the  original  contract  contemplated 
a  payment  to  order.  An  indorsement  signifies  that  order,  and 
transfers  the  instrument.  In  Colt  v,  Barnard  ^°  Chief  Justice  Shaw 
explains  that  each  indorsement  ratifies  the  original  contract  on  the 
face  of  the  instrument,  and  is  in  the  nature  of  a  new  draft  by  which 
the  holder  orders  the  maker  to  pay  the  contents  to  the  indorsee,  not, 
indeed,  when  the  instrument  by  its  terms  became  due,  but  within 
a  reasonable  time.  Other  authorities  deem  it  similar  to  an  inland 
bill  of  exchange  drawn  by  the  indorser  on  the  acceptor  of  the  bill  or 
the  maker  of  the  note,  payable  to  the  indorsee  at  sight  or  on  demand. 
And,  by  analogy,  the  duty  of  the  indorsee  of  such  an  instrument, 
if  he  would  hold  the  indorser,  is  generally  determined.®^  An  in- 
dorser is  liable  as  such  if  the  holder  performs  his  duty  in  demand- 
ing the  payment  in  a  reasonable  time.  By  this  is  meant  such  a 
time  as  would,  from  the  particular  circumstances  of  each  case,  be 
allowed  in  the  general  conduct  of  affairs  by  business  men. 

The  indorsee  of  a  negotiable  bill  or  note  after  maturity  takes  the 
same,  and  only  the  same,  interest  that  his  indorser  had.*'^     This  is 

84  2  Ames,  Bills  &  N.  p.  853. 

9  5  Colt  V.  Barnard.  18  Pick.  2G0.  In  this  case  a  note  was  indorsed  by  the 
defendant,  who  was  the  payee,  to  plaintiff,  after  maturity.  There  was  no 
evidence  of  demand  of  payment  on  the  maker,  or  of  notice  to  the  defendant. 
The  maker  was  insolvent  when  the  indorsement  was  made,  and  had  gone  to 
New  York,  in  which  state  a  judgment  had  been  obtained  against  him,  which 
was  unsatisfied.  It  was  held  that  a  note  so  indorsed  after  maturity  is  simi- 
lar to  a  bill  payable  at  sight,  and  to  charge  indorser  there  must  be  present- 
ment to  maker,  and  notice  to  indoi-ser. 

66  Byles,  Bills,  p.  169.  note;  Patterson  v.  Todd,  18  Pa.  St.  426. 

6  7  In  Pine  v.  Smith,  it  was  decided  that  one  who  takes  a  promissory  note 
Indorsed  on  the  last  day  of  gi'ace  does  so  subject  to  all  defenses  available  in 
the  hands  of  the  payee,  and  in  a  suit  against  the  maker  the  defendant  may 
prove  any  illegality  in  the  origiji  of  the  note.  18  Gray  (Mass.)  82.  A  mort- 
gage given  to  secure  a  note  for  the  payment  of  four  installments  was  taken 
when  one  installment  was  due  and  not  yet  paid.  It  was  held  that,  in  a  suit 
to  foreclose,  the  defendant  might  prove  duress  as  a  defense  to  the  whole 
note.  The  fact  that  one  installment  was  overdue  should  have  put  plaintiff 
on  inquiry.  Vinton  v.  King,  4  Allen  (Mass.)  562.  In  an  action  by  the  in- 
doa-see  against  the  maker  of  a  note  for  $55,  it  was  held  that  the  defendant 
might  show,  under  a  plea  of  nonassumpsit.  that  he  had  given  the  payee  $50 


202  TRANSFER.  [Ch.   6 

because  it  is  a  mere  chose  in  action.  He  buys  the  right  of  action 
which  the  indorser  had  to  sell.  He  buys  not  only  the  right  of  its  en- 
forcement, but  also  the  defenses  which  the  original  parties  may  have 
to  it.°*  To  give  expression  to  common  business  phrase,  he  buys  a 
lawsuit  for  whatever  it  is  worth,  with  the  chances  of  its  success  or 
failure,  as  events  may  turn.  The  reason,  as  will  be  shown  under  the 
subject  of  ''Notice,"  is  that,  when  an  indorsee  takes  an  instrument 
overdue,  it  is  presumed  he  was  acquainted  with,  or  had  notice  of, 
the  circumstances  which  would  affect  the  validity  of  it  as  against 
original  parties^*  had  it  been  in  the  hands  of  the  person  who  was 
the  holder  at  that  time.''"  He  cannot  be  treated  as  a  purchaser 
without  notice,  because  the  fact  that  the  instrument  has  not  been 
paid  when  the  acceptor  or  maker  promised  it  should  be  paid  implies 
that  there  is  some  reason  on  their  part  for  its  nonpayment.  And 
whether  he  has  inquired  for  this  reason  or  not  is  immaterial.  He 
should  have  made  such  inquiry,  and  the  law  will  hold  him  to  have 
made  it  He  is  charged  with  notice  of  all  facts  and  defenses  he 
would  have  found  out  had  he  made  the  inquiry.^ ^ 

But  there  is  a  limitation  to  this  rule.  It  is  that,  if  defenses  are 
not  available  against  the  assignor  or  indorser  of  the  overdue  paper, 
then  the  assignee  or  indorsee  Js  protected  against  them.     If  the 

shortly  after  the  assignment,  which  the  latter  had  agreed  to  credit  on  the 
note.  The  note  in  this  case  was  payable  on  demand,  and  was  negotiable  two 
and  a  half  months  after  date.  Losee  v.  Dunkin,  7  Johns.  (N.  Y.)  70.  See,  also, 
the  case  of  Holmes  v.  Kidd,  3  Hurl.  &  N.  891.  As  to  negotiability  of  a  note 
payable  on  demand  after  the  lapse  of  time,  see  Brooks  v.  Mitchell,  9  Mees. 
&  W.  lo.  As  to  burden  of  proof  in  case  of  transfer  after  maturity,  see  Eames 
V.  Crosier,  101  Cal.  260,  35  Pac.  873;  Tyler  v.  Young,  30  Pa.  St.  144. 

68  Folsom  V.  Bartlett,  2  Cal.  163;  Wheeler  v.  Barret,  20  Mo.  573;  Morgan 
V.  U.  S.,  113  U.  S.  500,  5  Sup.  Ct  588;  Harrell  v.  Broxton,  78  Ga.  129,  3  S.  E. 
5;  Money  v.  Ricketts,  62  Miss.  209;  Speck  v.  Pullman  Car  Co.,  121  111.  57,  12 
N.  E.  213;  Church  v.  Clapp,  47  Mich.  257,  10  N.  W.  362;  Wood  v.  McKean, 
64  Iowa,  IS,  9  N.  W.  817;  Marsh  v.  Mai-shall.  53  Pa.  St.  396;  Hays  v.  King- 
ston (Pa.)  16  Atl.  745. 

8  9  Hayword  v.  Stearns,  39  Cal.  58;  Nay  v.  Lamb,  15  Iowa,  79;  Etheridge 
V.  Gallagher,  55  Miss.  458. 

7  0  Williams  v.  Matthews,  3  Cow.  252. 

71  Fisher  v.  Leland,  4  Cush.  (Mass.)  456;  Hinckley  v.  Union  Pac.  R.  Co., 
129  Mass.  61;  Marsh  v.  Marshall,  53  Pa.  SL  396;  Greenwell  v.  Haydon,  78 
Ky.  333;  Kellogg  v.  Schaake,  56  Mo.  137;   Simpson  v.  Hall,  47  Conn.  417. 


Ch.   6]  OVERDUE    PAPER.  203- 

right  of  action  is  perfect  in  tlie  assignor  or  indorser,  the  assignee  or 
indorsee  buys  that  right  of  action,  and  all  of  if^^  It  is  immaterial 
that  indorsers  and  transferrors,  prior  to  the  indorser  after  maturity, 
had  notice,  and  were  not  in  the  position  of  the  bona  fide  holder.  If 
the  indorser  after  maturity  was  a  bona  fide  holder  for  value,  the  in- 
strument was  good  in  his  hands,  and  was  free  from  these  defenses. 
A  part  of  his  title  to  the  instrument  was  his  power  of  transferring 
to  others  with  the  same  immunity.  At  the  first  bona  fide  negotia- 
tion, all  defenses  between  original  parties  and  parties  having  notice 
cease  to  be  valid.'^^ 

In  some  jurisdictions,  the  fact  that  paper  is  accommodation 
paper,  without  other  reason,  constitutes  a  defense  when  that  paper 
is  transferred  when  overdue.  This  is,  however,  in  contravention  of 
the  law  as  laid  down  in  many  decisions,  and  the  reason  of  these  deci- 
sions is  that  the  courts  will  not  construe  a  contract  to  be  implied 
in  accommodation  paper  not  to  negotiate  it  after  it  becomes  due. 
There  must  be  express  words  to  that  effect  at  the  time  of  the  giving 
of  the  accommodation.  This  is  because  it  is  deemed  the  public 
policy  that  nothing  outside  the  bill  should  affect  an  indorsee  for 
value.   The  loan  of  credit  given  by  the  accommodation  party  was  indef- 

7  2  In  an  action  by  the  indorsee  of  the  drawer  against  the  acceptor,  it  was 
no  defense  that  the  drawer,  by  acceptor's  authority,  had  laid  bets  for  the  lat- 
ter, which  wei-e  lost,  and  had  been  paid  by  drawer,  and  that  the  bill  had 
been  drawn  and  accepted  for  the  amount  paid  by  the  drawer.  Money  had 
been  given  on  acceptor's  account  which  he  acknowledges  to  have  been  paid, 
which  constitutes  a  sufficient  consideration.  This  is  not,  therefore  an  attempt 
to  enforce  a  gambling  contract.  Oulds  v.  Harrison,  10  Exch.  572.  It  was 
held  in  Bank  of  Ft.  Edward  v.  Washington  County  Bank  that  a  certificate  of 
deposit  was  not  dishonored  until  it  was  presented.  The  transferee  of  such 
certificate  would  take  free  from  equities.    5  Hun  (N.  Y.)  605. 

73  Haskell  v.  Whitmore,  19  Me.  102;  Chalmers  v.  Lanion,  1  Camp.  383.  In 
this  action  by  indorsees  of  a  bill  of  exchange  against  the  acceptor,  one  of  the 
grounds  of  defense  was  that  the  bill  had  been  accepted  for  a  debt  contract- 
ed in  a  smuggling  transaction,  and  though  indorsed  for  value,  before  matur- 
ity, to  a  bona  fide  holder,  yet  that  it  had  been  indorsed  by  him  to  the  pres- 
ent plaintiffs  after  maturity.  It  was  held,  however,  that  if  the  bill  was  re- 
ceived from  one  who  might  maintain  an  action  upon  it,  the  fact  that  in- 
dorsement was  after  maturity  would  not  let  in  such  defense.  Smith  v.  His- 
cock,  14  Me.  449;  Solomons  v.  Bank  of  England,  13  East,  135,  note;  Miller  v. 
Taleott,  54  N.  Y.  114;  Britton  v.  Hall,  1  HUt  528. 


204  TRANSFER.  [Ch.   6 

inite  in  regard  to  the  extent  of  the  time  of  its  operation."'*  There  is 
a  criticism  to  be  made  upon  this  doctrine.  It  came  up  before  the 
courts  on  questions  of  pleading,  and  it  certainly  seems  not  too  much 
to  say  that  the  courts  appear  to  have  decided  the  matter  without 
giving  it  a  very  thorough  consideration.  In  Sturtevant  v.  Ford  the 
judges  held  themselves  bound  by  the  principle  of  stare  decisis, 
though  they  criticised  the  rule;  and  it  is  submitted  with  deference 
to  the  weight  of  authority  on  the  point  that  the  English  doctrine, 
as  it  is  followed  in  several  states  of  the  Union,  is  not  the  wiser  view. 
A  reasonable  presumption  of  the  intention  of  the  parties,  where 
they  had  said  nothing,  would  seem  to  be  that  the  purpose  of  accom- 
modation making,  accepting,  or  indorsing  is  only  to  lend  credit  to 
the  accommodated  party  for  the  term  of  the  instrument.  In  the 
case  of  an  indorsement,  it  is  to  guaranty  that  the  instrument  shall 
be  paid  at  maturity.  If  the  instrument  be  not  paid  at  maturity, 
then  the  contract  for  payment  is  broken,  and  the  bill  or  note  becomes 
a  mere  chose  in  action,  which  may  be  transferred  as  a  cause  of  ac- 
tion, but  not  as  a  bill  or  note.  If  the  cause  of  action  was  valid  in 
the  hands  of  the  holder,  then  it  may  be  enforced.  But,  if  defense 
of  want  of  consideration  could  be  raised  against  such  transfer,  then 
it  could  not  be  enforced.  If  the  accommodated  party  against  whom 
the  defense  of  want  of  consideration  can  be  raised  indorses  the 
paper  when  overdue,  the  bona  fide  holder  cannot  recover.^  ^  This 
in  no  way  varies  the  rule  that,  if  the  title  to  the  accommodation 

7*  Charles  v.  IMarsden,  1  Taunt.  224.  In  this  case  it  was  held  that,  in  an  action. 
by  an  indorsee  for  value  against  an  acceptor,  it  was  no  defense  that  the  bill  was 
accepted  for  the  accommodation  of  the  maker,  and  that  the  plaintiff  knew 
this  when  he  took  the  bill  after  maturity.  The  decision  in  Stein  v.  Yglesias 
also  sustains  the  rule  that  a  bill  which  has  been  accepted  when  overdue  is 
good  in  the  hands  of  one  to  whom  it  was  ti'ansfeiTed  when  overdue.  This 
will  not  be  tnie.  however,  when  the  bill  was  accepted  before  maturity,  and 
transferred  afterwards,  if  there  was  an  express  or  implied  agreement  be- 
tween acceptor  and  the  one  accommodated  that  such  bill  should  not  be  nego- 
tiated after  maturity.  3  Dowl.  252.  To  the  same  effect,  see  Sturtevant  v. 
Ford,  4  Man.  &  G.  101;  Brown  v.  Mott,  7  Johns,  361;  Grant  v.  Ellicott,  7 
Wend.  227;  Dimn  v.  Weston,  71  Me.  270;  Davis  v.  Miller,  14  Grat.  1;  Daniel, 
Neg.  Inst.  §  786. 

7  5  Chester  v.  Dorr,  41  N.  Y.  270;  Bower  v.  Hastings,  36  Ta.  St.  285;  Hoff- 
man V.  Foster,  43  Pa.  St.  137;  Battle  v.  Weems,  44  Ala.  105. 


Ch.   6]  OVERDUE    PAPER.  205 

paper  when  it  becomes  due  is  in  some  person  against  whom  the 
defense  of  want  of  consideration  will  not  avail,  then,  on  his  transfer 
of  it  as  a  chose  in  action  when  the  paper  is  overdue,  his  assignee 
takes  the  title  which  he  himself  had.  An  accommodation  party  can- 
not raise  the  defense  of  want  of  consideration  against  a  transferee 
of  overdue  paper  who  procures  it  from  a  bona  fide  holder  who,  in 
his  turn,  procured  the  paper  before  it  became  due  J' 

T«  Eckhert  v.  Ellis,  26  Hun,  663. 


206  DEFENSES.  [Ch.  7 


CHAPTER    VII. 

DEFENSES  COMMONLY  INTERPOSED  AGAINST  A  PURCHASER  FOR 
VALUE    WITHOUT    NOTICE. 

93.    Real  and  Personal  Defenses. 
94-108.  Real  Defenses. 

109-121.  Personal  Defenses. 

REAL   AND   PERSONAL   DEFENSES. 

93.  The  defenses  interposed  by  a  party  to  a  bill  or  note 
in  a  suit  brought  by  a  holder  against  him  are  commonly 
of  t"wo  classes : 

(a)  REAL — Or  those  which  grow  out  of  some   defect, 

inherent  in  the  instrument  itself. 

(b)  PERSONAL.— Or    those    which    grow    out    of   acts 

which  between  privy  parties  would  invalidate 
the  transfer  or  prevent  the  enforcement  of  the 
instrument,  but  w^hich  do  not  attach  to  or  in- 
validate the  instrument   itself. 

The  next  two  chapters  develop,  as  far  as  can  here  be  developed, 
the  position  in  contract  law  of  the  purchaser  for  value  without  no- 
tice. He  stands  alone,  in  that  the  law  will  enforce  his  rights 
against  certain  defenses,  which  would  avail  against  him  were  they 
interposed  in  any  other  kind  of  contract  than  a  negotiable  instru- 
ment. It  is  not  sought  to  give  a  statement  of  all  the  defenses  in- 
volved in  cases  of  commercial  paper.  It  is  neither  desirable  nor 
possible  to  give  an  adequate  statement  of  all  the  defenses  which  are 
interposed  against  even  a  bona  fide  holder.  It  is  sought  to  clas- 
sify only  the  common  defenses,  and  to  state  the  main  rules  concern- 
ing them,  and  the  reasons  for  these  rules.^ 

In  general,  this  classification  shows  that  a  bona  fide  holder  can  re- 
cover when  the  defense  interposed  is  a  personal  defense,  but  cannot 

1  The  classification  of  Professor  Ames  Las  been  adopted.  2  Ames.  Bills  & 
N.  p.  8GQ. 


Ch.  7]  REAL    AND    PERSONAL    DEFENSES.  207 

recover  when  the  defense  is  real.  In  the  case  of  immediate  parties, 
all  defenses  are  available,  because  each  independent  contract  is  gov- 
erned by  the  general  laws  of  contract.  In  the  case  of  remote  parties, 
where  the  holder  enforcing  the  instrument  is  a  purchaser  for  value 
without  notice,  a  personal  defense  cannot  be  successfully  interposed, 
and  only  the  real  defenses  are  allowed  by  the  courts. 

With  real  defenses  the  instrument,  as  a  legal  obligation,  has  never 
existed,  or  has  ceased  to  exist.  They  are  called  "real  defenses"  be- 
cause they  attach  to  the  res  or  thing,  irrespective  of  the  conduct 
or  agreement  of  the  parties  to  it.  It  cannot  be  enforced  by  the 
holder  because  there  is  no  instrument  to  enforce.  Personal  de- 
fenses, in  contrast  to  this,  are  founded  upon  the  act,  conduct,  or 
agreement  of  the  parties  with  reference  to  the  instrument.  The 
instrument  with  them  has  a  legal  inception,  and,  as  an  instrument, 
is  a  binding  obligation.  But,  as  between  immediate  parties,  the 
courts  will  not  grant  a  remedy,  because  the  plaintiff  in  the  ac- 
tion— the  party  seeking  its  enforcement  in  the  suit — has  violated 
some  right,  or  failed  in  some  duty,  so  that  he  has  no  standing  in 
court.  Hence,  while  the  instrument  is  in  form  a  binding  instru- 
ment, the  person  enforcing  it  has  no  rights  which  a  court  of  justice 
will  recognize.  The  reason  for  the  failure  in  its  enforcement  is 
therefore  not  real,  but  personal.  But  remote  parties  stand  upon 
another  footing  so  far  as  personal  defenses  are  concerned.  The 
elements  which  distinguish  them  in  legal  theory  from  immediate 
parties  are  consideration  and  notice.  In  this  the  principle  of  the  law 
merchant  is  the  ancient  principle  of  equity  that  where,  in  the  trans- 
fer of  title,  a  person  has  acquired  a  title  and  paid  a  valuable  consid- 
eration without  any  notice  of  an  equity  actually  existing  in  favor  of 
another,  the  former  may  by  that  means  obtain  a  perfect  title,  and 
holds  the  property  freed  from  the  prior  outstanding  equity.^  "One 
who  purchases  a  legal  title,"  says  Professor  Ames,^  "for  value  and 
without  notice,  takes  the  title  discharged  of  all  equities  to  which  it 
was  subject  in  the  hands  of  his  vendor.  For  an  equity,  being  in  its 
nature  a  claim  In  personam,  and  not  in  rem,  can  be  enforced  only 
against  a  party  to  the  transaction  in  which  the  equity  arises,  or  some 

2  Pom,  Eq.  Jur.  §  591;  Le  Neve  v.  Le  Neve,  2  Amb.  436,  2  Lead.  Cas.  Eq. 
(4th  Am.  Ed.)  109. 

3  2  Ames,  Bills  &  N.  p.  836. 


208  DEFENSES.  [Ch.  7 

one  in  privity  with  that  party.  The  transfer  of  bills  and  notes 
by  Tirtue  of  their  negotiability  is  governed  by  the  same  principle. 
A  purchaser  for  value  without  notice,  therefore,  acquires  a  title 
free  from  the  personal  defenses." 

SAME  — REAL   DEFENSES. 

94.  Common  real  defenses  are — 

(a)  The  incapacity  of  the   defendant  to   make  the 

instrument. 

(b)  Those   for   -which   statutes  declare   the  instru- 

ment void. 

(c)  Those  ^vhere  the  instrument  is   altered   in    a 

material  respect. 

(d)  Perhaps  lunacy  or  drunkenness. 

The  incapacity  of  the  defendant  is  usually  due  to  in- 
fancy, coverture,  ultra  vires,  or  lack  of  understanding. 
Of  these,  ultra  vires  is  a  personal  defense. 

INFANCY. — A  negotiable  instrument  or  its  indorsement 
made  by  an  infant  is  voidable,  not  void. 

It  was  the  opinion  of  Lord  Mansfield  *  and  of  the  bench  of  which 
Chancellor  Kent  was  chief  judge  ^  that  a  negotiable  instrument 
given  by  an  infant  was  void,  even  though  it  was  given  for  necessaries. 
The  reason  upon  which  these  great  jurists  and  the  judges  who  fol- 
lowed them  ^  based  their  opinion  was  that,  if  the  instrument  be 
valid  as  a  negotiable  one  in  the  first  instance,  the  consideration 
could  not  be  inquired  into  when  it  came  into  the  hands  of  a  bona 
fide  holder,  and  the  infant  would  thereby  be  precluded  from  ques- 
tioning the  consideration.  Thus,  the  instrument  could  not  be  voida- 
ble and  remain  negotiable.     It  must  be  either  void  or  good. 

*  Burgess  v.  Merrill,  4  Taunt.  468;  Williamson  v.  Watts,  1  Camp.  552 
In  this  case,  Lord  Mansfield  said:  "This  action  certainly  cannot  be  maintained. 
The  defendant  is  allowed  to  be  an  infant;  and  did  any  one  ever  hear  of  an 
Infant  being  liable  as  acceptor  of  a  bill  of  exchange?  Tlie  replication  is  non- 
sense, and  ought  to  have  been  demurred  to." 

6  Swasey  v.  Vanderheyden,  10  Johns.  33. 

6  M'Crillis  v.  How,  3  N.  H.  348;  McMinn  v.  Richmonds,  6  Yerg.  9;  Mor 
ton  v.  Steward,  5  111.  App.  533. 


Ch.   7]  REAL    AND    PERSONAL    DEFENSES.  209 

This  doctrine  is  certainly  not  now  the  law  in  its  entirety.  It  is 
settled  that  between  immediate  parties,  the  infant  being  one,  the 
instrument  is  voidable,  and  not  voidJ  This  means  that  the  infant 
may  ratify  or  repudiate  it,  as  he  sees  fit.  But  in  case  of  remote 
parties  the  question  is  a  more  complicated  one.  The  rule  un- 
doubtedly is,  that  a  bill  or  note,  to  be  negotiable,  must  be  payable 
absolutely  and  at  all  events.  And  one  argument  is  that,  since  an 
infant's  bill  or  note  is  voidable  and  contingent  upon  his  ratification 
of  itj  it  cannot  be  negotiable.  Yet  it  is  admitted  that  if  the  infant, 
on  his  majority,  choose  to  ratify  the  instrument  to  an  indorsee,  there 
is  no  reason  why  he  should  not  be  bound.*  The  reasons  of  the  text 
writers  thus  confronted  with  conflicting  principles  are  not  clear. 
On  the  one  hand,  there  can  be  no  doubt  that  the  position  of  the  pur- 
chaser for  value,  without  notice,  is  inferior  in  grade  of  right  to  that 
of  an  infant.  The  purchaser  cannot  maintain  that  the  contract, 
although  voidable,  nevertheless  is  still  valid  on  reaching  his  hands, 
because  not  disaffirmed,  and  that,  therefore,  his  equity  is  superior 
to  that  of  the  infant.  In  all  of  the  cases  where  this  doctrine  has 
been  applied  to  voidable  contracts  transferred  to  a  bona  fide  trans- 
feree, its  fundamental  reason  is  laches,  and  laches  is  not  allowed  to 
prejudice  an  infant's  rights.  In  analogous  cases,  too,  the  decisions 
of  courts  are  against  the  purchaser  for  value  without  notice.  For 
example,  the  equity  of  such  a  purchaser  in  cases  of  personal  prop- 
erty '  or  of  real  property  ^°  does  not  prevail  against  the  right  of  the 
infant  to  rescind  the  contract.  And  a  similar  doctrine  is  probably 
applied  to  the  purchaser  for  value  of  a  negotiable  instrument.^  ^ 
And  thus  the  facts  stand  that  the  instrument  cannot  be  negotiable, 
and  yet  it  may  vest  by  indorsement  a  perfect  title  in  the  transferee, 

T  Goodsell  V.  Myers,  3  Wend.  480;  Everson  v.  Carpenter,  17  Wend.  419; 
Martin  v.  Mayo,  10  Mass.  137;  Whitney  v.  Dutch,  14  Mass.  457;  Reed  v. 
Batchelder,  1  Mete.  (Mass.)  559;  Taft  v.  Sergeant,  18  Barb.  320;  Hodges  v. 
Hunt,  22  Barb.  150. 

8  Hunt  V.  Massey,  5  Barn.  &  Adol.  902;  Lawson  v.  Lovejoy,  8  Greenl.  405; 
Edgerly  v.  Shaw,  5  Fost.  (N.  H.)  514. 

9  Hill  V.  Anderson,  5  Smedes  &  M.  216. 

10  Mustard  v.  Wohlford's  Heirs,  15  Grat.  329;  Harrod  v.  Myers,  21  Ark, 
592;  Jenkins  v.  Jenkins,  12  Iowa,  195;  Miles  v.  Lingerman,  24  Ind.  385;  Sims 
V.  Smith,  80  Ind.  577;    Buchanan  v.  Hubbard,  96  Ind.  1. 

11  Howard  v.  Simpkins,  70  Ga.  322, 

NEG.  BILLS 14 


210  Di.iE.NSEs.  [Ch.  7 

pro\ided  the  infant  ratify  it  on  coming  of  age;  otherwise  if  he  dis- 
aflSrm  it,  and  return  the  consideration.  This  rule  does  not  include 
a  bill  or  note  given  for  necessaries,  which  is  probably  binding  in 
every  one's  hands,^^  or  cases  when  the  infant  himself  does  not  raise 
in  his  own  behalf  the  point  of  non-age;  ^^  and,  of  course,  it  does  not 
apply  where  the  infant  ratifies  the  instrument  on  coming  of  age. 

The  infant,  as  an  indorser,  is  no  more  liable  than  as  maker  or  ac- 
ceptor. His  indorsement  in  such  case  is  also  voidable,  and  not  void. 
This  means  not  only  that  the  infant  is  not  liable  upon  the  implied 
contract  of  indemnity  unless  he  chooses  to  be;  but,  according  to 
Judge  Story,^*  it  means  also  that  the  infant  may  intercept  the  pay- 
ment to  the  indorsee  by  disaffirming  the  contract,  and  returning  the 
consideration,  and  recover  the  money  called  for  in  the  instrument  of 
the  maker  or  acceptor.  K  the  disaffirmance  is  made  before  pay- 
ment to  an  indorsee,  it  is  a  defense  against  the  indorsee.  If  made 
after  paj'ment,  and  the  infant  is  payee,  the  acceptor  or  maker  must 
pay  the  money  twice,  because  they  have  warranted  the  capacity  of 
the  infant.  If  parties  prior  to  the  infant  receive  notice  of  the  in- 
fant's disaffirmance,  they  are  discharged  as  to  the  parties  subse- 
quent to  the  infant,  because  these  persons  have  lost  their  title  to 
the  paper  by  the  avoidance  of  the  indorsement,  and  they  must  look 
to  their  intermediate  warranties  to  protect  themselves.  But,  ex- 
cept as  against  himself,  the  indorsement  is  effectual  as  to  all  par- 
ties; and  neither  the  maker,  acceptor,  nor  any  other  party  can  re- 
fuse to  pay  the  instrument  on  the  ground  that  an  intermediate  in- 
dorser is  an  infant.^" 

95.  COVERTURE. — At  common  law  a  negotiable  instru- 
ment or  an  indorsement  made  by  a  married  -woman  -was 
not  voidable,  but  void.  This  rule  has  been  modified,  by 
statutes  in  most  jurisdictions. 

12  Earle  v.  Reed,  10  Mete.  (Mass.)  387;  Dubose  v.  Wheddon,  4  McCnrd  (S. 
C.)  221;  Haine's  Adm'rs  v.  Tarrant,  2  Hill  (S.  C.)  400.  See,  contra,  Trueman 
T.  Hurst,  1  Term  R.  40;   Williamson  v.  Watts,  1  Camp.  552. 

13  Hastings  v.  Dollarhide,  24  Cal.  195;  Nightingale  v.  Withington,  15  Mass. 
272. 

1*  Story,  Prom.  Notes,  §  80. 

15  Story,  Prom.  Notes,  §§  80-85;  Tied.  Com.  Paper,  §  49;  Daniel,  Neg.  Inst 
i  228. 


Cll.    1}  REAL    AND    PERSONAL    DEFENSES.  2j  1 

The  above  is  an  enunciation  of  the  rule  of  the  common  law,  now 
almost  obsolete.  The  reason  for  the  rule  wherever  it  exists  is  that, 
according  to  the  former  doctrine  of  the  marriage  relation,  the  wife 
merged  her  personality  in  that  of  her  husband,  and  had  therefore 
no  capacity  to  contract  apart  from  him.  If  a  bill  or  note  was  made 
payable  or  indorsed  to  her  before  marriage,  it  became  her  husband's 
property  on  marriage ;  and  if  after  marriage,  then,  by  virtue  of  the 
operation  of  the  law,  it  became  her  husband's.  So  a  married  woman 
could  not  indorse,  not  only  because  she  had  no  capacity  to  do  so,  but 
also  because  the  instrument  was  not  hers  to  indorse,  but  was  the 
property  of  her  husband.^"  But  the  legal  relations  of  married 
women  at  the  present  day  are  changing.  The  statutes  of  the  vari- 
ous states  are  constantly  enlarging  their  property  rights,  and  it  will, 
without  doubt,  soon  be  the  law  in  most  of  the  states  of  the  Union 
that  married  women  may  contract  in  all  respects  as  if  single,  and 
that  coverture  will  be  no  defense  to  suits  upon  negotiable  instru- 
ments. 

96.  CORPORATIONS.— The  bill  or  note  of  a  corporation 
and  its  indorsement  thereon  is  unenforceable,  except  as 
against  a  bona  fide  holder,  unless  made,  given,  or  indorsed 
for  the  purposes  of  its  incorporation. 

97.  An  indorsement  of  a  corporation  transfers  title;  but, 
except  "when  made  for  the  purposes  of  its  incorporation 
and  as  against  a  bona  fide  holder,  it  subjects  the  corpora- 
tion to  no  liability  as  an  indorser. 

18  Thus,  in  Connor  v.  Martin,  1  Strange,  516,  where  the  plaintiff  declared 
upon  a  promissory  note  made  to  a  feme  covert,  and  indorsed  by  her  to  him, 
judgment  was  given  for  the  defendant,  the  right  being  in  point  of  law  vested 
in  the  husband,  and  the  wife  having  no  power  to  dispose  of  it.  In  Barlow  v. 
Bishop,  1  East,  432,  it  was  held  that  though  a  note  were  given  to  a  mar- 
ried woman,  knowing  her  to  be  such,  with  intent  that  she  should  indorse  it 
to  the  plaintiff  in  payment  of  a  debt  which  she  owed  him  (in  the  course  of 
carrying  on  a  trade  in  her  own  name  by  the  consent  of  her  husband),  yet 
the  property  in  the  note  vested  in  the  husband  by  the  delivery  to  the  wife, 
and  no  interest  passed  by  her  indorsement  to  the  plaintiff.  Where  a  bill 
of  exchange  was  payable  to  a  feme  sole,  who  intermarried  before  the  same 
was  due,  it  was  held  that  the  husband  might  sue  in  his  own  name  without 
joining  the  wife,  although  the  latter  had  not  indorsed  the  bill.  McNellage 
V.  Holloway,  1  Barn.  &  Aid.  218. 


212  DKIKNSES.  [Cll.  7 

A  corporation  is  defined  as  an  artificial  being  created  by  law, 
composed  of  individuals  united  into  one  body  under  a  collective 
name,  with  the  capacity  of  perpetual  succession,  and  of  acting  as  a 
natural  person  within  the  scope  of  its  charter.  It  is  one  of  the  busi- 
ness methods  by  which  men  enlarge  the  effectiveness  of  property. 
For  in  business  property  or  capital  is  the  motive  power;  men's 
brains  and  hands  the  great  machinery  for  earning  money.  And 
by  the  business  contrivances  of  agencies,  partnerships  and  corpora- 
tions, a  man's  capital  may  be  busy  earning  money  in  ways  of  which 
the  owner  know^s  nothing.  The  agent  and  partner  is  a  man's  other 
business  self  in  the  enterprise  in  which  the  agency  or  partnership  is 
involved.  But  a  corporation  is  of  a  somewhat  different  character. 
Frequently  a  large  number  of  persons  having  money  whose  invest- 
ment they  cannot  personal!}'  supervise,  aggregate  their  separate  cap 
itals  in  one  enterprise,  some  furnishing  more,  some  less,  the  capital 
being  evidenced  by  what  is  called  ''stock,"  the  owners  being  called 
the  "stockholders."  This  aggregate  capital  is  invested  in  given 
business  enterprises,  and  employed  in  ways  expressly  formulated  by 
legislatures.  For  the  purpose  of  carrying  out  these  legislative  de 
signs,  officers  are  chosen  by  the  stockholders  from  among  their  own 
number,  called  "trustees"  or  "directors,"  and  from  these  in  turn,  gen- 
erally, the  administrative  function  is  created,  consisting  of  an  execu- 
tive called  a  "president"  or  a  "secretary"  or  "managing  agent,"  or 
some  similar  name,  to  supervise  and  direct  the  investment  of  the 
capital  furnished  by  the  stockholders,  and  execute  generally  the 
business  of  the  corporation.  The  business  of  the  corporation  is  not, 
how^ever,  carried  on  in  the  name  of  its  administrative  or  executive 
officers,  directors,  or  stockholders.  The  aggregate  capital  is  created 
into  a  distinct  legal  being  and  becomes  like  an  ordinary  person  in  all 
its  legal  dealings.  It  takes  a  name  of  its  own.  It  acts  through  the 
instrumentality  of  its  executive  officers,  as  though  it  had  a  mind  of 
its  own.  And  people  buy  from  and  sell  to  it,  and  contract  with  it,  as 
though  it  were  itself  an  acting  sentient  person. 

The  law  which  creates  this  artificial  person  makes  it  the  au- 
thorized agent  of  the  investing  capitalist  to  do  certain  things  only. 
These  general  purposes  are  found  in  its  charter,  which  is  the 
legislative  act  creating  it,  and  is  the  commission  of  the  corporation 
to  do  business.     And  it  is  fair  to  suppose  that  the  only  intention 


CJl.    7]  REAL    AND    PERSONAL    DEFENSES.  213 

of  the  capitalist  in  investing  his  money  in  stock  is  that  his  money  is 
to  be  devoted  to  carrying  out  the  purposes  of  the  incorporation,  and 
nothing  else,  and  that  he  intended  by  such  investment  only  to  get 
what  proportionate  profit  his  money  earned,  and  incur  a  propor- 
tionate share  of  the  total  loss  suifered  in  the  enterprise.  But  for 
anything  outside  of  this,  he  did  not  intend  to  be  bound.  Naturally, 
therefore,  when  any  act  is  not  within  the  scope  of  its  charter,  or  the 
purposes  of  its  incorporation,  the  power  of  agency  of  the  corpora- 
tion ceases.  In  law  phrase  the  act  is  "ultra  vires."  And  because 
the  individual  stockholders,  for  whose  collective  body  the  corpora- 
tion is  but  another  name,  and  whose  agent  the  corporation  is,  can- 
not be  presumed  to  have  intended  to  incur  any  liability  not  contem- 
plated by  its  charter,  and  not  necessary  to  carry  on  its  business. 
Such  an  act  is  void.  Hence  the  meaning  of  the  rules  that  a  corpora 
tion  has  power  to  make  such  contracts  as  are  either  expressly  or  im- 
pliedly authorized  by  its  charter  or  act  of  incorporation,  or  are 
necessary  or  not  foreign  to  the  carrying  on  of  its  business,^ ^  but  that 
it  has  no  capacity  to  perform  acts  beyond  these  express  or  implied 
powers.  Therefore  an  executory  contract  ultra  vires  is  void.  It 
can  be  enforced  neither  by  nor  against  the  corporation.^* 

The  power  of  a  corporation  to  make  contracts  necessary  to  carry 
on  its  business,  implies  that  it  may  borrow  money,  make  debts  and 
issue  negotiable  paper  for  the  purposes  of  its  business.^"      So  that 

17  Thomas  v.  Railroad  Co.,  101  U.  S.  82;  Perrine  v.  Canal  Co.,  9  How.  1S4; 
Bank  v.  Godfrey,  23  111.  579;  Western  Cottage  Organ  Co.  v.  Reddish,  51 
Iowa,  55,  49  N.  W.  1018;  Richardson  v.  Massachusetts  Charitable  Mechanic 
Ass'n,  131  Mass.  174;  Weckler  v.  First  Nat.  Bank,  42  Md.  581;  Booth  v. 
Robinson,  55  Md.  419;  Wayland  University  v.  Bcorman,  56  Wis.  657,  14  N. 
W.  819;  State  v.  Rice,  65  Ala.  83;  Cleveland  &  M.  R.  Co.  v.  Himrod  Furnace 
Co.,  37  Ohio  St.  321;  Curtis  v.  Leavitt,  15  N.  Y.  64;  Spear  v.  Crawford.  14 
Wend.  22;  Page  v.  Heineberg,  40  Vt.  81;  Rivauna  Nav.  Co.  v.  Dawsous.  3 
Grat.  19:  Thompson  v.  Waters,  25  Mich.  222;  Moss  v.  Averell,  10  N.  Y.  449; 
AuU  Sav.  Bank  v.  City  of  Lexington,  74  Mo.  104. 

18  Hitchcock  V.  Galveston,  96  U.  S.  341;  Bank  of  Michigan  v.  Niles,  1  Doug. 
401;   Nassau  Bank  v.  .Tones,  95  N.  Y.  115. 

19  Mining  Co.  v.  Anglo-Calif ornian  Bank,  104  U.  S.  192;  Moss  v.  Harpeth 
Academy,  7  Heisk.  285;  Rockwell  v.  Elkhorn  Bank,  13  Wis.  653;  Smith  v. 
Eureka  Flour  Mills,  6  Cal.  1;  Munn  v.  Commission  Co.,  15  Johns.  44;  Curtis 
V.  Leavitt,  15  N.  Y.  173;  Booth  v.  Robinson,  55  Md.  419;  Goodrich  v.  Rey- 
nolds. 31  111.  490. 


214  DEKKNSES.  [Ch .   7 

the  rule  is  that  wherever  a  corporation  may  contract  a  debt,  it  may 
draw  a  bill  or  give  a  note  in  payment  of  it.^°  It  may  also  borrow 
money  to  pay  the  debt,  and  in  furtherance  of  this  may  execute  a  bill 
or  note  to  secure  the  borrowed  money.^^  Also,  it  has  power  to 
take  a  bill  or  note  for  a  debt  due  to  it.  And  what  it  may  receive, 
it  may  transfer.-^  And  this  means  that  instruments  may  be  in- 
dorsed in  full  or  in  blank  by  corporations,  including  also  the  power 
to  enter  into  the  collateral  contract  which  an  indorser  assumes.^ ^ 

The  converse  of  these  propositions  is  not  what  might  be  expected. 
The  limit  of  the  rule  apparently  is  that  a  bill  or  note  ultra  vires 
is  unenforceable  only  as  between  immediate  parties;  but  a  bill 
or  any  other  negotiable  security  which  is  not  upon  its  face  illegal 
and  unauthorized,  is  valid  in  the  hands  of  a  purchaser  for  value 
without  notice,  except  in  those  cases  in  which  the  security  is  made 
void  by  statute.  The  reason  for  this  is,  that  one  who  deals  di- 
rectly with  a  corporation,  or  who  takes  its  negotiable  paper,  is 
presumed  to  know  the  extent  of  its  corporate  power.  But  when 
the  paper  is  upon  its  face  in  all  respects  such  as  the  corporation 
has  authority  to  issue,  and  its  only  defect  consists  in  some  extrinsic 
fact,  such  as  the  purpose  or  object  for  which  it  was  issued,  and 
a  bona  fide  holder  for  value  receives  it,  he  may  enforce  it  against 
the  corporation.  He  is  not  bound  to  inquire  into  such  extrinsic  fact 
He  is  in  no  way  apprised  of  it  from  the  paper  itself.  And  the 
burden  should  not  be  cast  upon  him  of  suffering  loss  under  such 

20  1  Pars.  Notes  &  B.  1G4,  165. 

21  Mott  V.  Hicks,  1  Cow.  513;  Safford  v.  Wyckoff,  4  Hill,  442;  Moss  v. 
Oakley,  2  Hill.  2G5;  Mead  v.  Keeler,  24  Barb.  20;  Partridge  v.  Badger,  25 
Barb.  14G;  Hamilton  v.  Newcastle  &  D.  K.  K.,  9  Ind.  o59;  Came  v.  Brigham, 
39  Me.  35;   Clarke  v.  School  Dist.,  3  R.  I.  199;   Buckley  v.  Briggs,  30  Mo.  452. 

22  Lucas  V.  Pitney,  27  N.  J.  Law,  221;  Mclntire  v.  Preston,  10  111.  48; 
Hardy  v.  Merriweatber,  14  Ind.  203. 

23  Bank  of  Genesee  v.  Patchin  Bank,  13  N.  Y.  309.  The  following  Is  a 
portion  of  the  opinion  of  Denio,  J.,  in  this  case:  "I  entertain  no  doubt  but 
that  a  bank  may  lawfully  indorse  the  commercial  paper  which  it  holds,  with 
a  view  to  raise  money  upon  it  by  way  of  discount,  or  for  any  other  lawful 
purpose.  In  this  respect  it  has  the  same  right  as  any  other  holder  of  such 
paper.  •  •  *  The  contract  of  indorsement  is  incident  to  the  negotiation 
of  mercantile  paper,  and  the  right  to  transfer  such  paper  includes  the  power 
to  enter  into  the  collateral  eonti*act  which  an  indorser  assumes."  Marvine 
V.  Hymers,  12  N.  Y.  223;   Planters'  Bank  v.  Sharp,  6  How.  301. 


Ch.  7]  KEAI,    AND    I'KUSONAL    DEFENSES.  215 

circumstances,  and  it  is  not.-*  This  rule  applies  both  to  the  making 
or  accepting  a  note  or  bill  and  to  their  indorsement.^"^  And  of 
course  its  necessary  implication  is,  that  if  the  ultra  Tires  is 
known  to  the  purchaser,  the  instrument  or  the  indorsement  is  un- 
enforceable against  the  corporation. 

The  general  scope  of  this  work  does  not  admit  of  the  discussion  of 
interesting  questions  concerning  commercial  paper  of  public  corpo- 
rations, the  execution  of  bills  and  notes  by  the  agents  of  corpora- 
tions, and  lastly  the  character  of  acts  within  the  power  of  corpora- 
tions. For  these  the  students  must  refer  to  more  extensive  treat- 
ises. 

It  remains  under  this  head  to  speak  of  the  effect  of  indorsements 
ultra  vires  upon  the  transfer  of  title.  The  rule  is  that  an  indorse- 
ment ultra  vires  is  a  good  transfer  of  the  instrument,  although  it 
is  ultra  vires,  and  therefore  not  binding  except  as  above  stated 
upon  the  corporate  indorser.^®  The  reason  is  that  to  be  an  indorser, 
the  corporation  must  be  either  the  payee  or  an  indorsee  of  the 
instrument.  And  being  such  payee  or  indorsee,  the  parties  liable 
on  the  paper  are  estopped  from  pleading  ultra  vires,  because  they 
have  made  the  paper  payable  to,  or  else  have  indorsed  it  to,  the 
corporation,  and  have  received  its  funds.  The  defense  of  ultra 
vires  is  for  the  protection  of  the  stockholders  of  a  corporation,  and 
not  for  the  benefit  of  the  other  parties  to  the  paper.-^  It  is  like 
the  defense  of  illegality  of  incorporation,  which  is  not  meant  as 
an  excuse  for  the  nonpayment  of  indebtedness,  but  as  a  protection 

2  4  Genesee  Bank  v.  Patchin  Bank,  13  N.  Y.  309;  Farmers'  &  Mechanics* 
Bank  v.  Butctiers'  &  Drovers'  Bank,  IG  N.  Y.  125. 

2  6  Mechanics'  Banking  Ass'n  v.  New  York  &  S.  W.  L.  Co.,  35  N.  Y.  505. 
See,  also,  for  general  doctrine,  Bank  of  New  York  v.  Muskingum  Branch  Bank 
of  Ohio,  29  N.  Y.  G19;  Barker  v.  Mechanics'  Fire  Ins.  Co.,  3  Wend.  94;  Olcott 
V.  Tioga  R.  Co.,  27  N.  Y.  546;  Supervisors  v.  Schenck,  5  Walk  772;  Bird  v. 
Daggett,  97  Mass.  494;  Monument  Nat.  Bank  v.  Globe  Works,  101  Mass. 
57;  Mitchell  v.  Rome  R.  Co.,  17  Ga.  574;  Hall  v.  Auburn  Turnpike  Co.,  27 
Cal.  255. 

2  6  Smith  V.  Johnson,  3  Hurl.  &  N.  222;   Brown  v.  Donnell,  49  Me.  421. 

2T  Farmers'  &  Merchants'  Ins.  Co.  v.  Needles,  52  Mo.  17;  Snyder  v.  Stude- 
baker,  19  Ind.  4G2;  Griener  v.  Ulerey,  20  Iowa,  2GG;  Massey  v.  Paola  Bldg. 
&  Sav.  Ass'n,  22  Kan.  G34. 


21G  DEFENSES.  [Ch.  7 

to  those  whose  money  is  invested  in  the  stock  of  the  enterprise.''* 
Thus,  the  transfer,  though  ultra  vires,  transfers  title,  because  prior 
parties  are  estopped  from  taking  advantage  of  the  defense. 

98.  PERSONS  NON  COMPOS  MENTIS.— Total  lack  of 
understanding  in  persons  non  compos  mentis  or  drunken 
is  a  defense  to  the  enforcement  of  a  bill  or  note,  both  as 
bet"ween  immediate  parties  and  as  against  a  bona  fide 
holder,  when  the  party  sought  to  be  charged  was  an  ad- 
judged incompetent.  It  is  doubtful  w^hether  in  itself  it  is- 
such  a  defense  to  an  instrument  sought  to  be  enforced  by  a 
holder  if  tlie  holder  w^as  one  in  good  faith  for  value,  and 
without  notice.  It  is  in  itself  a  defense  as  between  the 
immediate  parties,  unless,  perhaps,  the  contract  was  fair 
and  the  other  party  had  no  knowledge  of  the  lunatic's  in- 
competency. 

The  views  of  courts  are  changing  with  reference  to  bills  or  notes, 
upon  which  persons  non  compos  mentis  have  incurred  an  obligation. 
They  are  departing  from  a  position  which  was  sustained  by  con- 
tjistent  theory,  but  at  the  expense  of  justice  and  common  sense. 
This  theory  was  that  such  executory  contracts  would  not  be  en- 
forced by  courts,  because  persons  non  compos  mentis  had  no  as- 
senting mind,  and  therefore  no  capacity  to  contract,^"  and  also  be- 
cause the  courts  would  protect  such  persons  from  the  results  of 

28  Veeder  v.  Mudgett,  05  N.  Y.  295;  Eaton  v.  Aspinwall,  19  N.  Y,  119: 
Wright  V.  Pipe  Line  Co.,  101  Pa.  St.  201;  Union  Nat.  Bank  v.  Hunt.  7  Mo. 
App.  42;   In  re  Kings  Co.  El.  R.  Co.,  105  N.  Y.  97,  13  N,  E.  IS. 

23  Sentance  v.  Poole,  3  Car.  &  P.  1.  In  this  case  Lord  Tenterden,  C.  J., 
delivered  the  following  charge:  "The  question  in  this  case  is  whether  the  de- 
fendant John  Poole,  at  tlie  time  he  put  his  name  to  this  note,  which  is  drawn 
in  an  unusual  form,  it  being  'to  your  order.*  and  not  addressed  to  any  one, 
was  or  was  not  conscious  of  what  he  was  doing,  for,  if  he  was,  there  must 
be  a  verdict  for  the  plaintiff;  but  should  you  be  satisfied  that  he  was  not 
conscious  of  what  he  was  doing,  and  that  he  was  imposed  upon  by  reason 
of  his  imbecility  of  mind,  you  ought  to  find  for  the  defendant."  Seaver  v. 
Phelps,  11  Pick.  304;  Daniels,  Neg.  Inst.  210;  Edw.  Neg.  Inst  §  24;  In  re 
Desilver's  Estate,  5  Rawle,  111;  Van  Deusen  v.  Sweet,  51  N.  Y.  378;  Dexter 
V.  Hall,  15  Wall.  9. 


Ch.    7]  lUCAL    AND    PERSONAL    DEFENSES.  217 

their  own  incapacity,  whether  designedly  injured  or  even  not  in- 
jured at  all.  And  while  probably  the  majority  of  the  decisions 
and  very  many  of  the  text  writers  do  in  truth  declare  this  to  be 
the  rule,^*^  it  is  generally  felt,  whenever  it  is  applied,  that  it  is, 
as  a  working  rule,  impracticable.  The  consensus  of  opinion  in  re- 
gard to  executed  contracts,  at  least,  is  that  the  contract  of  a  luna- 
tic is  only  voidable  at  his  option,  if  it  can  be  shown  that  at  the 
time  of  making  the  contract  it  was  unfair,  that  the  parties  can 
be  restored  to  their  former  condition,  and  that  the  lunatic  was 
absolutely  incapable  of  understanding  what  he  was  doing,  and  the 
other  part}'  knew  of  his  condition.^ ^  But  with  executory  con- 
tracts, and  among  them  negotiable  instruments,  the  law  has  not 
gone  so  far.  There  is  still  great  weight  of  authority  holding  that  a 
lunatic's  contract  is  voidable,  at  his  option,  whether  fair  or  un- 
fair, or  whether  the  other  party  is  ignorant  of  or  acquainted  with 
his  mental  condition;  ^^  and  it  must  be  said  that  any  other  doc- 
trine than  this  is  not  yet  established.  But  more  advanced  views, 
based  on  business  needs  and  the  practical  administration  of  law, 
are  changing  or  perhaps  developing  this  rule  into  rules  which  may 
be  formulated  as  follows: 

(1)  After  inquisition  duly  found,  the  courts  will  refuse  to  enforce 
the  bill  or  note  of  an  adjudged  lunatic,  or  an  indorsement  by  him 
against  him  directly,  even  in  favor  of  a  bona  fide  holder,  but  will 
direct  his  committee  to  pay  the  amount  thereof,  if  it  is  a  just  claim. 
This  rule  applies  to  the  bills,  notes  and  indorsements  of  adjudged 
habitual  drunkards. 

(2)  If  no  inquisition  has  been  found,  but  the  incompetency  is 
known  to  the  other  party,  then  as  between  the  parties  the  note 
is  void. 

(3)  If  no  inquisition  has  been  found,  and  if  the  incompetency 
is  unknown  to  the  other  party,  and  the  transaction  is  fair,  and  the 

30  Moore  v.  Hershey,  90  Pa.  St.  19G;  Van  Patten  v.  Beals,  46  Iowa,  G3. 

31  Molton  V.  Camroux,  4  Exch.  17;  Elliot  v.  Ince,  7  De  Gex,  M.  &  G.  478; 
Brown  v.  Jodrell,  3  Car.  &  P.  30;  Beals  v.  See,  10  Pa.  St.  5G;  Bebrens  v.  Mc- 
Kenzie,  23  Iowa.  333;  Shoulters  v.  AUen,  51  Mich.  530,  16  N.  W.  SSS;  Mat- 
thiessen  v.  McMahon,  38  N.  J.  Lnw,  536. 

8  2  Sentance  v.  Poole,  3  Car.  &  P.  1;  Seaver  v.  Phelps,  11  Pick.  304;  Hovey 
V.  Hobson,  53  Me.  451;  Rogers  v.  Blackwell,  49  Mich.  192,  13  N.  W.  512;  Van 
Patten  v.  Beals,  40  Iowa,  63;   Daniel,  Neg.  Inst.  §  210;   Tied.  Com.  Paper,  53. 


218  DKKEN^^KS.  [Ch.   7 

parties  cannot  be  restored  to  statu  quo,  a  recovery  may  be  had 
upon  the  bill,  note  or  indorsement  against  the  incompetent. 

An  inquisition  in  lunacy  is  a  judgment  of  the  law  which  gives  over 
the  person  and  estate  of  the  lunatic  to  the  custody  of  court,  and 
takes  from  him  all  competency  to  contract  until  his  rights  are  re- 
stored by  the  court  itself.  By  virtue  of  it,  contracts  of  lunatics  made 
after  inquisition  found,  create  no  binding  legal  tie,  because  it  rests 
with  the  court  in  whose  hands  their  property  is  to  allow  or  disal- 
low their  enforcement.^'  The  redress  for  claimants  in  obtaining 
payment  of  claims,  is  to  present  them  to  the  officer  of  the  court  com- 
missioned to  conduct  the  affairs  of  the  lunatic,  who  is  usually  called 
the  "committee,"  of  his  person  and  estate.  This  committee  upon 
their  presentment  investigates  the  transaction,  and  ascertains  its 
justice.  If  the  committee  refuses  payment,  the  claimant  must  then 
go  into  court,  and  ask  permission  to  prosecute  his  claim  by  suit. 
If  the  court  is  satisfied  of  the  justice  of  the  debt,  it  will  order  it  paid 
out  of  the  funds  in  the  hands  of  its  committee;  if  doubtful,  it  will 
appoint  a  referee  or  master  in  chancery  to  ascertain  its  justice,  or 
else  direct  it  to  be  tested  By  a  suit  to  be  brought.^*  The  law  to  pro- 
tect its  own  machinery  declares  that  an  inquisition  found  is  like  a 
proceeding  in  rem,  conclusive  on  all  the  world,  and  all  are  bound 
to  take  notice  of  it.  Actual  notice  is  not  necessary,  and,  whether 
given  or  not,  is  immaterial.  The  inquisition  is  conclusive  against 
subsequent  acts  and  dealings,  and  presumptive  against  prior  ones. 
And  this  is  the  rule  irrespective  of  notice.^  ^  It  must  be  noted  that 
in  England  the  inquisition  is  only  presumptive  evidence  of  lunacy,'* 
and  that  in  some  states  it  is  conclusive  only  as  to  parties,  and  others 
may  rebut  it  by  clear  evidence.'^     It  is  not  meant  to  say,  however, 

33  Fitzhugh  V.  Wilcox,  12  Baib.  23G;  Ciippen  v.  (Culver,  13  Barb.  424;  Clarke 
V.  Dunham,  4  Denio,  2G2;   In  re  McLaughlin,  Clarke,  Ch.  113. 

3  4  Williams  v.  Cameron,  2G  Barb.  172;  In  re  Hopper,  5  Paige,  489,  491; 
L'Amoureaux  v.  Crosby,  2  Paige,  42S;   In  re  Wing,  2  Hun,  G71. 

3  5  Hughes  v.  Jones,  116  N.  Y.  67,  22  N.  E.  446;  Banker  v.  Banker,  63  N.  Y. 
409;  Van  Deusen  v.  Sweet,  51  N,  Y.  378;  Ripley  v.  Grant,  4  Ired.  Eq.  (X.  C.) 
443;  McGinnis  v.  Com.,  74  Pa.  St.  245;  Lancaster  Co.  Bank  v.  Moore,  78  Pa. 
St.  407. 

36  Sergeson  v.  Sealey,  2  Atk.  412;   Faulder  v.  Silk,  3  Camp.  126. 

37  Den  V.  Clark,  10  N.  J.  Law,  217;  Rogers  v.  Walker,  6  Pa.  St.  371;  Moore 
V.  Hershey,  90  Pa.  St.  19G;   Carter  v.  Beckwith,  128  N.  Y.  312,  28  N.  E.  582; 


Ch.   7]  REAL    AND    PERSONAL    DEFENSES.  219 

that  the  lunatic  by  inquisition  is  relieved  from  debts  or  liabilities 
incurred  either  before  or  after  the  inquisition.  All  that  is  meant 
is  that  he  can  no  longer  buy  or  sell  or  enter  into  any  contract  or 
dealing  binding  him  or  his  estate.  The  court  administers  his  estate 
for  the  protection  of  creditors,  and  will  apply  it  to  the  payment  of 
his  debts  and  the  satisfaction  of  all  obligations  and  charges  which 
legally  ought  to  be  satisfied  out  of  his  property. 

This  rule  and  the  reasons  for  it  apply  to  the  bills,  notes  and  in- 
dorsements of  those  adjudged  to  be  habitual  drunkards.  If  a  per- 
son is  adjudged  incompetent  to  manage  his  own  affairs  by  reason 
of  drunkenness,  such  peraon  is  not  liable  upon  his  bill,  note  or  in- 
dorsement even  when  that  is  in  the  hands  of  a  bona  fide  holder. 
The  holder  and  purchaser  is  bound  to  take  notice  of  the  public  judi- 
cial act  of  taking  a  man's  property  out  of  his  hands,  and  putting 
it  into  that  of  a  committee.  The  creditor  must  have  his  recourse 
against  the  committee,  and  not  against  the  drunkard.  And  if  the 
remedy  is  thus  taken,  and  the  court  is  satisfied  upon  the  whole  that 
the  claim  is  just,  it  will  allow  it  to  be  paid.^® 

If  no  inquisition  has  been  found,  the  validity  of  the  bill,  note  or 
indorsement  depends,  first,  upon  the  degree  of  understanding  pos- 
sessed by  the  party  sought  to  be  charged.  A  man  of  weak  mind, 
if  not  a  lunatic  or  a  fool,  can  contract.^®  An  epileptic  or  enfeebled 
mind  has  been  held  competent  to  convey  property.*''  A  person 
bom  deaf  and  dumb  is  not  necessarily  an  idiot.*^  And  no  mere 
want  of  business  capacity,*-  nor  even  monomania,*^  will,  in  the  ab- 
sence of  fraud,  prevent  a  party  from  being  bound  upon  a  bill,  note, 
or  indoi*sement.      The  mental  incompetency  to  avoid  such  a  contract 

People  V.  Tax  Com'rs,  100  N.  Y.  215,  3  N.  E.  85;  Southern  Masonic  Relief  Tier 
Ass'n  V.  Laudenbach  (Sup.)  5  N.  Y.  Supp.  901. 

3  8  Wadsworth  v.  Sbarpsteeu,  8  N.  Y.  388;  L'Amoureaux  v.  Crosby,  2  Paige, 
427. 

39  Odell  V.  Buck,  21  Wend.  142. 

40  Sprague  v.  Duel,  Clarke,  Ch.  90,  affirmed  11  Paige,  480. 

41  Brower  v.  Fisher,  4  Johns.  Ch.  441. 

4  2  Farnum  v.  Brooks,  9  Pick.  212;  Osmond  v.  Fitzroy,  3  P.  Wms.  129;  Stew- 
art V.  Lispenard,  26  Wend.  255;  Lawrence  v,  Willis,  75  N.  C.  471;  Lewis  v. 
Pead,  1  Ves.  Jr.  19. 

43  Burgess  v.  Pollock,  53  Iowa,  273,  5  N.  W.  179;  West  v.  Russell,  48  Mich. 
74,  11  N.  W.  812;    Boyce  v.  Smith,  9  Grat.  704. 


1220  DEFf:NSES.  [Ch.  7 

must  aipount  to  inability  to  understand  the  nature  of  the  contract, 
and  to  appreciate  its  probable  consequences;**  and  this  only,  upon 
being  established,  will  be  allowed  as  a  defense.  But,  once  estab- 
lished, the  question  of  the  binding  liability  of  this  contract  depends 
upon  the  fact  whether  the  party  dealing  with  him  knew  or  did  not 
know  that  he  was  dealing  with  a  lunatic.  In  the  absence  of  any- 
thing being  shown  upon  the  subject,  the  conrts  lean  to  the  presump 
tion  that  the  party  had  this  knowledge.*^  And  if  he  possessed 
such  knowledge,  then  the  bill,  note  or  indorsement  as  between  the 
parties  is  void,  and  will  not  be  enforced.'*'*  But  if  he  did  not  pos- 
sess such  knowledge,  then  the  x)Osition  of  the  parties  has  not  as 
yet  been  fully  developed  and  settled  by  the  courts;  but  so  far  as 
it  has,  it  depends,  in  the  first  place,  upon  whether  the  contract 
is  fair.  The  courts  have  not  defined  what  is  meant  by  this,  and 
its  meaning  naturally  would  be  determined  largely  by  the  circum- 
stances of  each  casa  But  in  the  absence  of  any  expression  on  the 
subject,  it  is  reasonable  to  suppose  that  a  fair  contract  would  mean 
such  as  business  men  of  ordinary  prudence  would  make,  taking  into 
consideration  the  circumstances  of  each  case,  and  that  the  pres- 
ence or  absence  of  any  intent  to  defraud,  overreach  or  cheat  would 
be  an  important  element  in  determining  the  point.  The  next  con- 
sideration in  the  relations  of  the  parties,  is  whether  upon  repudia- 
tion of  the  contract  by  the  lunatic  the  other  party  can  be  restored 
to  statu  quo.  This  is  because  the  right  of  cancellation,  being  an 
equitable  one,  must  be  governed  by  equity  precedents,  and  among 
equity  precedents  one  of  the  most  important  is  that  "he  who  seeks 
equity  must  do  equity."  The  lunatic  cannot  keep  the  benefits  of  a 
contract,  and  at  the  same  time  rescind  it.  And  these  two  consid- 
erations lead  up  to  the  rule,  which  is  without  doubt  the  most  prac- 
tical yet  determined  upon,  that  bills,  notes  or  indorsements  entered 

44  Titcomb  v,  Vantyle,  84  111.  371;  Wall  v.  Hill,  1  B.  Mon.  200;  Hovey  v. 
Chase,  52  Me.  30.j;  Davren  v.  White.  42  N.  J.  Eq.  560,  7  Atl.  G82;  Young  v. 
Stevens,  48  N,  H.  133;  Farnam  v.  Brooks,  9  Pick.  212;  Jackson  v,  Iving,  4 
Cow.  207. 

40Riggs  V.  American  Tract  Soc,  84  N.  Y.  330,  reargued  95  N.  Y.  503. 

46  Westei-field  v.  Jackson,  3  N.  Y.  St.  Rep.  354;  Rice  v.  Peet,  15  Johns.  503; 
Johnson  v.  Stone,  35  Hun,  380;  Hannahs  v.  Sheldon,  20  Mich.  278;  McClain 
V.  Davis,  77  Ind.  419;  Lrincolu  v.  Buckmaster,  32  Vt  G52;  Burke  v.  Allen,  29 
N.  H.  lOG. 


Ch.   7]  REAL    AND    PERSONAL    DEFENSES.  221 

into  by  an  insane  person  are  valid  wliere  the  other  party  acted  in 
good  faith,  without  fraud  or  unfairness,  and  without  knowledge  of 
the  insanity  or  notice  or  information  calling  for  inquiry.*'^  Wheth- 
er the  other  party  has  the  full  rights  of  a  bona  fide  holder  or  not, 
and  whether  all  presumptions  are  in  his  favor  or  not,  is  not  clear. 
Declarations  of  courts  within  recent  years  imply  that  the  presump- 
tions are  not  in  his  favor,  and  that,  lunacy  being  shown,  the  bur- 
den is  upon  the  holder  to  show  ignorance,  fairness  and  irreparable 
loss.**  But  it  is  to  be  suspected  that  the  courts  in  making  these 
decisions  were  influenced  more  by  the  ancient  doctrines  than  the 
modern  tendencies  of  law.  These  modern  tendencies,  followed  to 
their  logical  conclusion,  would  seem  to  require  that  it  be  shown 
affirmatively  against  the  holder  that  in  his  dealing  with  the  negoti- 
able instrument  he  had  violated  some  of  the  equities  we  have  men- 
tioned. And  that  the  defendant  should  be  called  upon  not  only  to 
show  the  lunacy,  but  also  the  plaintiff's  knowledge  or  suspicion  of 
it,  as  well  as  the  unfairness  of  the  transaction.  Such,  however,  at 
present,  does  not  seem  to  be  the  rule. 

The  courts  have  arrived  at  rules  regulating  contracts  of  intoxicated 
persons  by  very  similar  steps.  These  rules  depend  upon  the  question 
whether  the  drunkard  was  adjudged  incompetent  to  manage  his 
affairs  or  not,  and,  if  not,  then  the  question  arose  in  what  stage  of 
drunkenness  the  contract  was  made.  They  have  classified  the  rules 
in  cases  where  no  committee  has  been  appointed  as  follows : 

(1)  When  a  maker,  acceptor  or  indorser  is  so  intoxicated  that  he  is 
entirely  bereft  of  his  senses,  the  weight  of  authority  is  that  no  recov- 
ery against  him  can  be  had  by  the  bona  fide  holder;  and,  if  no  recov- 
ery can  be  had,  then  he  may  recover  ujwn  the  original  consideration. 

(2)  That  when  a  maker,  acceptor  or  indorser  is  slightly  under  the 
influence  of  liquor,  a  recovery  can  be  had.  Such  a  state  can  be  used 
only  to  show  fraud. 

*7  Mutual  Life  Ins.  Co.  v.  Hunt,  79  N.  Y.  541;  Browne  v.  Joddrell,  1  Moody 
&  M.  105;  In  re  Beck  with,  3  Hun,  443;  Hirsch  v.  Trainer,  3  Abb.  N.  C.  274. 
and  note;  Dane  v.  Kirkwall,  8  Car.  &  P.  679;  Molton  v.  Camroux,  2  Exch. 
487,  affirmed  4  Exch.  17;  Elliot  v.  Ince,  7  De  Gex,  M.  &  G.  475;  Young  v. 
Stevens,  48  N.  H.  133;  Beals  v.  See,  10  Pa.  St.  56;  Behrens  v.  McKenzie,  23 
Iowa,  343. 

*8  Hicks  V.  Marshall,  S  Hun,  327;    GoodeU  v.  Harrington,  3  Thomp.  &  C.  345. 


222  DKFENriKS.  [Ch.   7 

In  cases  of  bills  and  notes  made  in  a  state  of  complete  intoxication 
by  persons  not  adjudged  habitual  drunkards,  there  is  a  difference 
of  opinion  in  different  jurisdictions.  The  majoiity  of  decisions  of 
the  courts  and  also  the  majority  of  the  text  writers  declare  that  total 
drunkenness  is  a  perfect  defense  to  a  drunkard's  bill  or  note  or  the 
indorsement  thereon.  And  these  authorities  imply  that  it  is  such 
even  when  prosecuted  by  a  purchaser  for  value  without  notice,  be- 
cause, as  they  say,  it  is  voidable.*"  But  there  are  other  opinions  of 
courts  which  consider  such  a  bill  or  note  perfectly  good  in  his 
hands."^"  The  English  courts  are  governed  in  their  rulings  by  the 
somewhat  artificial  differences  growing  out  of  their  former  system 
of  pleading.  In  those  courts  it  is  held,  with  regard  to  contracts 
which  it  is  sought  to  avoid  on  the  ground  of  intoxication,  that  there 
is  a  distinction  between  "express"  and  "implied"  contracts.  When 
a  right  of  action  is  grounded  upon  an  express  contract,  requiring  the 
assent  of  both  parties,  and  one  of  them  is  incapable  of  assenting, 
there  can  be  no  binding  contract.  But  in  many  cases  the  law  does 
not  require  an  actual  agreement  between  the  parties,  but  implies 
a  contract  from  the  circumstances,  and  itself  makes  the  contract 
for  the  parties.  A  tradesman,  for  example,  who  supplies  a  drunken 
man  with  necessaries  may  recover  the  price  of  them,  if  the  party 
keeps  them  when  he  becomes  sober. ''^  And  so  with  negotiable  in- 
struments, the  defendant  is  still  liable  for  the  consideration  of  the 
instrument  or  of  the  indorsement,  though  he  is  not  upon  the  instru- 
ment itself.  Upon  the  other  side  of  the  question,  it  is  urged  in  be- 
half of  the  bona  fide  holder  that  the  equities  are  in  favor  of  the  bona 
fide  holder.  Drunkenness  ought  not  to  be  regarded,  because  it  is 
the  man's  own  fault.^^  It  is  not  to  be  placed  on  the  footing  of  in- 
sanity, because  it  is  temporary.  The  law  protects,  and  ought  to 
protect,  the  helpless  infant  and  the  God-stricken  insane,  but  should 

4»  Gore  V.  Gibson,  13  Mees.  &  W.  623;  Wiggleswortli  v.  Steers,  1  Hou.  & 
M.  70;  Jermers  v.  Howard,  6  Blackf.  240;  Hawldus  v.  Bone,  4  Post.  &  P. 
311;  Byles,  Bills,  64;  Tied.  Com.  Paper,  §  57;  Daniel,  Neg.  Inst.  §  214.  But 
see  Wilson  v.  Nisbet,  Mor.  Diet.  1509. 

eo  Johnson  v.  Medlicott,  3  P.  Wms.  130,  note;  State  Bank  v.  McCoy,  09  Pa. 
St.  204;   Neeley  v.  McSparran,  91  Pa.  St.  17. 

"-.  Pollock,  C.  B.,  in  Gore  v.  Gibson,  13  Mees.  &  W.  023. 

32  Wilson  V.  Nisbet,  2  Mor.  Diet.  1509. 


Ch.    I  ]  REAL    AND    PERSONAL    DEFENSES.  223 

not  the  vicious  or  foolish  drunkard.  And  of  two  aggrieved  parties 
— ^the  drunkard  and  the  bona  fide  holder — it  would  seera  clearly  that 
the  equities  of  the  latter  should  prevail.^*  When  the  intoxicated 
person  is  not  bereft  of  his  senses,  there  can  be  no  doubt  about  the 
position.  If  the  party  were  only  in  that  state  of  pleasant  exhilara- 
tion common  in  such  cases,  and  was  clear  in  his  mind  upon  what  he 
was  doing,  then  intoxication  is  no  defense.  It  may  only  be  used 
as  a  means  of  showing  fraud,  for  intoxication  may  have  been  used 
as  a  means  of  imposing  upon  the  party  to  the  instrument.  But  here 
the  fraud,  and  not  the  intoxication,  is  the  basis  of  defense.''*  The 
party  had  capacity  to  incur  an  obligation,  and  the  courts  wall  en- 
force the  obligation  he  has  incurred.  That  his  senses  were  clouded 
would  be  no  excuse.  The  court  could  no  more  take  that  into  con- 
sideration than  it  could  that  one  party  was  sharper  than  another  in 
making  a  bargain. ''' 

99.  STATUTES.— Statutes  which  avoid  instruments  are 
of  the  following  varieties: 

(a)  Those  w^hich  in  words  declare  the  contract  void. 

(b)  Those  which  annex  a  penalty  to  the  consideration 

or  performance  of  the  act  for  which  the  bill,  note, 
or  indorsement  is  given. 

This  section  is  properly  but  a  part  of  the  latter  one  of  this  chapter 
upon  "Illegality  of  Consideration."  And  both  of  these  sections  are 
but  extracts  of  the  positions  taken  upon  the  subject  of  the  legality 
of  the  object  of  contracts  in  the  elementary  works  upon  that  subject. 
The  scope  of  this  work  does  not  admit  of  a  thorough  discussion  of 
the  statutes  which  render  the  consideration  of  bills,  notes  and  in- 
dorsements illegal.  To  pursue  that  subject  with  any  thoroughness, 
the  student  must  examine  works  on  the  general  subject  of  contracts. 

B3  Berkley  v.  Cannon,  4  Rich.  Law,  136;  Northam  v.  Latoucbe,  4  Car.  &  r. 
145.    And  see  Smith  v.  Williamson,  Johns.  Cas.  Bills  &  N.  193. 

54  Saj'  V.  Barwick,  1  Ves.  &  B.  IQo;  Willcox  v.  Jackson,  51  Iowa,  208,  1  N. 
W.  513. 

55  Miller  v.  Finley,  26  Mich.  249;  Caulkins  v.  Fiy,  35  Conn.  170;  Reinicker 
V.  Smith,  2  Har.  &  J.  421 ;    Reynolds  v.  Dechaums,  24  Tex.  174. 


224  DEFENSES.  [Ch.  7 

It  is  our  purpose  only  to  state  the  leading  principles  concerning  the 
application  of  statutes  avoiding  contracts  to  bills  and  notes,  and  then 
to  discuss  somewhat  more  at  length  the  statutory  doctrine  of  usury, 
which  of  all  the  statutes  avoiding  negotiable  instruments,  is  most 
often  before  the  courts. 

Statutes  may  avoid  a  bill  or  note  in  two  ways.  The  first  is  where 
in  words  it  declares  them  to  be  void.°'  Such  a  declaration  means 
that  it  was  the  object  of  the  legislature  entirely  to  prevent  the  cir- 
culation of  a  bill  or  note  as  commercial  paper.  And  this  object  the 
courts  will  enforce  despite  any  equities  that  a  bona  fide  purchaser 
may  have.  The  reason  for  this  is  that  the  public  good,  evidenced 
by  this  intention  to  prevent  circulation,  overrides  any  private  right.^^ 
The  student  must  note  carefully  that  this  reasoning  does  not  apply 
when  the  statute  merely  declares  the  consideration  of  a  bill  or  note 
to  be  illegal.  An  illegal  consideration  is  one  which  may  be  in  itself 
valid.  Yet  courts  will  not  enforce  it,  because  the  legislature  has  de- 
clared in  its  statute  that  the  people  deem  it  against  the  public  wel- 
fare to  allow  it  to  be  enforced.  Therefore,  in  view  of  the  legislative 
act,  it  is  an  invalid  consideration,  or,  in  other  words,  no  consideration 
at  all.  Hence,  against  a  bill  or  note  in  the  hands  of  a  bona  fide 
holder,  mere  illegality  of  consideration  can  no  more  be  urged  than 
lack  of  consideration  can.^^  For,  in  declaring  a  consideration  ille- 
gal merely,  the  legislature  will  not  be  presumed  to  intend  to  prevent 

56  An  instance  of  this  is  found  in  the  case  of  Bowyer  v.  Bampton,  2  Strange, 
1155,  where  it  was  held  that  the  innocent  indorsee  of  a  gaming  note  can 
maintain  no  action  against  the  drawer.  He  may,  however,  sue  the  indorser 
upon  his  indorsement.  This  case  was  decided  in  accordance  with  St.  9  Anne, 
c.  14,  §  1,  which  says  "that  all  notes,  where  the  whole  or  any  part  of  the  con- 
sideration is  money  knowingly  lent  for  gaming,  shall  be  void  to  all  intents 
and  purposes  whatever."  For  other  cases  in  which  bills  or  notes  are  void  by 
virtue  of  a  statute,  see  Bennison  v.  Jewison,  12  Jui'.  4S5  (where  a  bill  could 
not  be  shown  in  evidence  through  want  of  a  stamp);  Easter  v.  Minard,  26  111. 
494;  Taylor  v.  Atchison,  54  111.  19G;  Bayley  v.  Taber,  5  Mass.  286;  AViggin 
V.  Bush,  12  Johns.  (N.  Y.)  306;   First  Nat.  Bank  v.  Grindstaff,  45  Ind.  158. 

6  7  Bayley  v.  Taber,  5  Mass,  286;  City  of  Aurora  v.  West,  22  Ind.  88;  Cazet 
V.  Field,  9  Gray,  329;  Towne  v.  Rice,  122  Mass.  67;  Glenn  v.  Farmers'  Bank, 
70  N.  C.  191;   Bowyer  v.  Bampton,  2  Strange,  1155. 

5  8  Rockwell  V.  Charles,  2  Hill  (N.  Y.)  499;  Hill  v.  Northrup,  4  Thomp.  &  C. 
120;    Grimes  v.  Hillenbrand,  4  Hun,  354. 


Ch.    7]  REAL    AND    PERSONAL    DEFENSES.  225 

tli('  circulation  of  the  bill  or  note,  but  merely  to  forbid  its  enforce- 
ment between  immediate  parties.^^ 

The  second  general  class  of  statutes  which  avoid  bills  and  notes 
are  those  which  inflict  penalties.  It  is  thought  by  the  courts  that 
the  intention  of  the  legislature  in  affixing  penalties  is  to  suppress  a 
mode  of  dealing  which  it  regards  as  injurious  to  society  by  attainting 
the  contract,  and  attaching  penal  consequences  to  it  whenever  set 
up  as  a  proof  of  debf*'  Such  at  least  is  the  early  doctrine,  and  it 
would  seem  to  be  the  view  of  the  courts  at  present  that  a  penalized 
consideration  renders  the  bill  or  note  void,  and  not  merely  Ulegal. 
And  because  it  is  void,  and  because  its  circulation  is  against  the 
public  welfare,  no  bona  fide  holder  can  enforce  it.  But  this  rule  also 
has  its  limitation.  A  penalty  is  only  a  prohibition  when  the  object 
of  the  statute  is  to  protect  the  public.  And  if  it  is  clear  that  this 
is  not  the  object  of  the  penalty,  but  that  it  is  enforced  for  adminis- 
trative purposes,  then  this  rule  does  not  apply."^  And  with  these 
very  general  remarks  upon  statutes  avoiding  negotiable  instruments, 
let  us  turn  to  the  statute  of  usury. 

100.  USURY. — The  statute  which  commonly  creates  a 
real  defense  is  the  statute  of  usury.  Usury  is  taking  or 
receiving,  -with  corrupt  intent,  money,  goods,  or  things  in 
action  as  a  rate  of  interest  upon  the  loan  or  forbearance 
of  money,  in  a  greater  amount  than  is  allo\7ed  by  statu- 
tory la^v. 

101.  The  holder  of  a  bill  or  note,  even  if  he  be  a  pur- 
chaser for  value  "v^ithout  notice,  cannot  recover  the 
amount  of  the  instrument  from  persons  "who  "were  parties 
to  the  instrument  at  its  inception,  -when  the  instrument 
was  negotiated  in  its  inception  at  a  rate  greater  than  the 
legal  rate  of  interest. 

5  8  Vallett  V.  Parker,  6  Wend.  615. 

eo  Shaw,  0.  J.,  in  Kendall  v.  Robertson,  12  Cnsh.  156;  Griffith  v.  Wells,  3 
Denio,  226;    Woods  v.  Armstrong,  54  Ala.  1."jO. 

«i  Anson,  Cont.  p.  172;  Pol.  Cont.  pp.  253-254;  Clark,  Cont.  p.  387,  and 
cases. 

NEG. BILLS 15 


226  DEFENSES.  fCh.  7 

102.  Where  a  holder  acquires  a  bill  or  note  by  an  in- 
dorsement at  a  rate  greater  than  the  legal  rate  of  inter- 
est, such  indorsement  is  a  sale  by  the  indorser  and  a  pur- 
chase by  the  indorsee,  for  -which  the  indorsee  may  recover 
the  full  amount  of  the  maker,  acceptor,  or  other  prior 
parties,  and  the  amount  paid  for  the  bill  of  his  prior  in- 
dorser. 

Usury  is  of  that  class  of  e\dls  called  in  law  "malum  prohibitum." 
Bj  Ibis  is  meant  something  that  is  in  itself  not  intrinsically  wrong, 
but  something  which  the  people,  through  their  legislatures,  have  de- 
clared inexpedient  as  a  business  practice,  and  therefore  not  to  be 
allowed.  It  is  a  w^rong  which  is  created  by  statute,  and  in  deroga- 
tion of  common  law.  And  the  first  thing  to  be  noticed  is,  that  the 
statutes  which  create  it  are  strictly  construed  and  their  operation 
is  confined  in  every  possible  way.  To  constitute  usury  three  ele- 
ments are  necessary:  (1)  More  than  the  lawful  rate  of  interest 
must  have  been  received  or  reserved.  (2)  It  must  be  the  effect  of  a 
corrupt  agreement.  (3)  The  subject  of  the  contract  must  be  a  loan. 
And  in  discussing  the  subject  in  the  brief  space  permitted  here,  it 
is  purposed  in  the  first  place  to  outline  very  generally  the  nature  of 
usury,  and  then  to  consider  the  commonest  instances  in  which  it 
arises  in  cases  of  bills  and  notes. 

Intent. 

Usury  is  the  effect  of  a  corrupt  agreement.  There  must  exist  the 
intention  knowingly  to  commit  usury.^^  This  intent  of  the  parties, 
when  the  contract  is  not  upon  its  face  usurious,  is  to  be  gathered 
from  such  circumstances  as  the  situation  and  object  of  the  parties 
at  the  time  of  the  loan,  the  character  and  use  to  be  made  of  the 
funds  or  article  transferred,  and  the  time  and  manner  and  place  of 
payment.  Designedly  taking  and  receiving  interest  greater  than 
the  legal  rate,  although  there  be  no  corrupt  agreement  other  than 
that  which  is  manifested  by  one  party  allowing  and  the  other  re- 

82  Price  V.  Campbell,  2  Call  (Va.)  110;  Condit  v.  Baldwin,  21  N.  T.  219; 
Noui-se  V.  Prime,  7  Jolins,  Ch.  77;  Bank  of  U.  S.  v.  AVaggener,  9  Pet.  399; 
Tyson  v.  Rickard,  3  Har.  &  J.  109;  Bearce  v.  Bai'Stow,  9  Mass.  45;  Scott  v. 
Lloyd,  9  Pet.  418;    Duncan  v.  Maryland  Sav.  Inst.,  10  Gill.  &  J.  299. 


Ch.   7]  REAL    AND    PERSONAL  .DEFENSES.  227 

ceiving  interest,  is  sufficient  evidence  of  intent.     In  fact,  this  is  gen- 
erally the  way  in  which  the  corrupt  agreement  is  shown. 

Loan  or  Forhearance  of  Money. 

It  is  a  well-settled  rule  that  the  loan  must  be  of  money,''  unless 
otherwise  expressly  provided  by  statute.  An  agreement,  for  example, 
whereby  the  parties  loaned  cattle,  upon  the  understanding  that 
during  the  loan  the  lessee  was  to  pay  a  stipulated  sum  for  the  use  ot 
the  property,  with  the  further  stipulation  that  the  lease  might  ter- 
minate in  sale,  but,  if  the  sale  was  not  carried  out,  the  cattle  were  to 
be  returned,  was  held  not  a  usurious  one.  The  case  turned  upon  the 
principle  that,  where  the  agreement  was  for  the  loan  of  chattels,  it 
was  immaterial  whether  the  compensation  fixed  by  the  agreement 
exceeded  the  statutory  rate,  because  the  subject  of  the  loan,  since  it 
Avas  not  money,  was  not  within  the  statute  of  usury.  An  agreement 
where  sheep  were  loaned,  and,  by  the  contract,  the  same  number 
were  to  be  returned,  of  the  same  age  and  quality,  with  interest  of  15 
to  25  per  cent,  upon  theh  cash  value,®*  and  another  agreement 
where  a  heifer  was  loaned  at  an  interest  of  25  per  cent.,  to  be  re- 
turned in  kind,®^  were  considered  not  usurious.  These  differ  from 
money,  in  that  money  is  supposed  to  have  a  fixed  value.  Chattels 
vary  according  as  the  market  rises  or  falls.  Therefore  a  loan  of 
animals  to  be  returned  in  animals  is  not  usury,  usury  being  con- 
fined to  money  only.  The  courts  construe  this  out  of  the  term 
usually  employed  in  the  statutes,  "the  rate  of  interest."  They  take 
the  ground  that  interest  and  forbearance  cannot  be  predicated  of 
any  other  than  a  loan  of  money,  actual  or  presumed,  because  money 
has  the  same  value  when  the  loan  is  made  and  when  returned; 
whereas  chattels,  measured  by  the  standard  of  money,  so  fluctuate 
that  taking  the  chattels  borrowed  and  returned  with  the  compensa- 
tion for  the  use  of  the  same  at  the  time  of  returning  the  borrowed 
property,  may  or  may  not  aggregate  in  money  value  the  value  of  the 

63  Dry  Dock  Bank  v.  American  Life  Insurance  &  Tnist  Co.,  3  N.  Y.  344; 
Bull  V.  Rice,  5  N.  Y.  315;  Perrine  v.  Hotchkiss,  2  Lans.  416;  Dunliam  v.  Dey, 
13  Jolins.  40;  Suydam  v.  Westfall,  4  Hill,  211;  Ketcham  v.  Barber,  Id.  225; 
Tardeveau  v.  Smith's  Ex'rs,  Hardin  (Ky.)  185;  Foote  v.  Emerson,  10  Vt  338; 
Spencer  v.  Tilden,  5  Cow.  144. 

64  Hall  V.  Haggart,  17  Wend.  280. 

6  5  Cummings  v,   Williams,  4  Wend,  680.' 


228  DEFENSES.  [Cil.   7 

property  loaned  in  the  first  instance.  In  the  case  of  negotiable  in- 
siruments,  where  an  accommodation  party  makes,  accepts,  or  in- 
dorses an  instrument,  and  receives  a  commission  for  so  doing,  de- 
ducted from  the  avails  of  the  note  itself,  there  is  no  usury/"  The 
statute  forbids  an  illegal  rate  of  interest  upon  the  loan  or  forbear- 
ance of  money.  This  is  a  loan  of  credit,  and  not  of  money,  credit  being 
a  distinct  property  from  money.  So  lenders  may,  in  addition  to  law- 
ful interest  on  the  discount  of  bills  and  notes,  take  a  reasonable 
commission  by  way  of  compensation  for  trouble  and  expense,  pro- 
vided such  commission  be  not  intended  as  a  device  to  cover  a  usuri- 
ous loan."^  In  all  of  these  things,  the  moneys  paid  or  deducted 
were  for  some  other  reason  than  the  mere  loan  of  money  itself. 
Something  was  done  in  addition  to  handing  over  the  money,  and 
that  something  was  paid  for.  Such  payment  was  not  interest,  but 
rent  or  compensation,®^ 

Discounting —  Compound  Interest. 

Another  thing  to  mention  is  the  common  practice  by  which  a  note 
is  discounted  in  advance  upon  its  face  value.® ^  The  lender  here  has 
the  use  of  his  own  discount,  and  this,  in  case  of  discount  of  paper  in 
large  amounts,  aggregates  sometimes  very  large  sums  of  money. 
This  is,  in  fact,  usurious,  but,  time  out  of  mind,  it  has  been  the  cus- 
tom, and  is  allowed  for  the  benefit  of  trade.     It  is  confined  in  its 

ee  Van  Duzer  v.  Howe,  21  N.  Y,  531;   Kitchel  v.  Schenck,  29  N.  Y.  515. 

67  Thurston  v.  Cornell,  38  N.  Y.  281;  Morton  v.  Tburber,  85  N,  Y.  551; 
Eaton  V.  Alger,  2  Abb.  Dec.  5;  Trotter  v.  Curtis,  14  .Johns.  IGO;  Dayton  v. 
Moore,  30  N.  J.  Eq.  543;  Atlanta  Mining  &  Rolling  Mill  Co.  v.  Gwyer,  48  Ga. 
11;  Cockle  v.  Flack,  93  U.  S.  344;  De  Forest  v.  Strong,  8  Conn.  513.  In  Kent 
V.  Walton,  7  Wend.  (N.  Y.)  256,  it  was  held  by  Savage,  C.  J.,  that,  "to  make 
out  the  defense  of  usury,  it  was  necessary  to  shew  that  the  note  was  not  a 
valid  instrument  when  discounted.  *  *  *  It  is  well  settled  that  discount- 
ing a  business  note  at  more  than  seven  per  cent  interest  is  not  usuiy." 
"The  principle  is  too  well  settled  to  be  questioned  that  a  bill  free  from  usuiy 
in  its  concoction  may  be  sold  at  a  discount;  because,  as  It  was  free  from 
usury  between  the  original  parties  to  it,  no  subsequent  transaction  can,  as 
it  respects  those  parties,  invalidate  it."  Sutherland,  J.,  in  Cram  v.  Hen- 
dricks, Id.  569,  572.  And  see  W  iff  en  v.  Roberts,  1  Esp.  261.  But  see  Cloflin 
V.  Boorum,  Johns.  Cas.  Bills  &  N.  168. 

6  8  Ketchum  v.  Barber.  4  Hill  (N.  Y.)  225. 

69  Marviue  v.  Ilymers.  12  N.  Y."223. 


Ch.   7]  REAL    AND    PERSONAL    DEFENSES.  229 

operation  to  negotiable  instruments,  because  of  their  importance  in 
commercial  affairs,  and  because  it  is  the  established  custom  of  banks, 
which  play  so  important  a  part  in  discounting  them  that  on  all 
hands  it  is  deemed  necessary  for  the  circulation  of  the  instrument 
in  the  course  of  trade.  Again,  compound  interest  is  not  usury.''*' 
There  is  this  distinction,  however :  An  agreement  for  compounding 
future  interest  is  illegal,  not  because  such  agreements  are  obnoxious 
to  the  usury  laws,  but  because  they  may  serve  as  a  temptation  to 
negligence  on  the  part  of  the  creditor  and  a  snare  to  the  debtor,  and 
prove  in  the  end  oppressive  and  ruinous.''^  But  where  the  interest 
has  already  accrued,  then  the  parties  may  lawfully  agree  to  turn 
such  interest  into  principal,  and  to  carry  the  interest,  and  the  for- 
bearance will  constitute  a  consideration.  As  a  matter  of  fact,  there 
is  no  new  loan,  and  the  interest  is  in  excess  of  the  legal  rate.  But 
the  law  implies  a  loan,  and,  an  agreement  being  made,  it  declares 
the  contract  free  from  the  taint  of  usury. 

Effect  of  Usury. 

But,  usury  being  once  present,  the  next  question  is,  how  far  does 
the  statute  operate  in  avoidance  of  contracts  where  it  in  wordp 
declares  the  contract  void  or  penalizes  the  transaction.  The  gen 
eral  rule  in  such  cases  is  that,  as  between  immediate  parties  in 
respect  to  all  persons  seeking  enforcement  of  the  contract,  it  is 
void.  Usury  being  a  purely  statutory  defense,  the  statutes  must 
be  examined  in  each  instance  to  know  just  the  extent  of  its  effect. 
The  taint  of  usury  in  the  original  contract  is  carried  forward  and 
enters  into  all  subsequent  contracts  taken  in  renewal  of  it.  And 
if  it  appears  that  a  contract  in  the  first  instance  is  void,  and  is 
sought  to  be  renewed  by  changing  its  form,  so  that  the  contract  still 
stands  upon  the  original  loan,  then  the  loan  given  in  renewal  is  also 
void.'^^  This  general  rule  is  also  very  much  confined,  the  excep- 
tions being  probably  more  numerous  than  the  application  of  the 

7  0  Stewart  v.  Petree,  55  N.  Y.  621;  Guernsey  v.  Rexford,  G3  N.  Y.  631; 
Culver  V.  Bigelow,  Johns.  Cas.  Bills  &  N.  171;  Miner  v.  Paris  Bxcb.  Bank, 
53  Tex.  559;  Hamilton  v.  Le  Grange,  2  H.  Bl.  144;  Fobes  v.  Canttield,  3  Ohio, 
17. 

Ti  Quackenbush  v.  Leonard,  9  Paige,  334;   Young  v.  Hill,  67  N.  Y.  162. 

T2  Campbell  v.  Sloan,  62  St.  4S1;  Pickett  v.  Merchants'  Nat.  Bank.  32  Ark. 
346. 


230  Di:n:xsi:s.  [Ch.  7 

rule  itself.  A  mortgage,  for  instance,  may  be  void  for  usury,  but  a 
bona  fide  purchaser  of  the  property  under  its  foreclosure  acquires 
good  title.''^  A  party  is  estoj)ped  from  setting  up  usury  where, 
by  his  representations,  he  has  persuaded  an  innocent  party  to  dis- 
count a  negotiable  instrument.  Contracts  voidable  for  usury  may 
be  ratified  and  become  valid  contracts.^^  And  also,  where  a  re- 
newal note  is  void  for  usury,  the  parties  may  sue  upon  the  original 
consideration.'' °  And,  lastly,  usury  is  a  defense  which  can  only 
be  availed  of  by  parties  to  the  contract,  or  those  connected  in  in- 
terest with  them.  A  mere  stranger,  or  one  who  has  no  legal  inter- 
est in  the  question,  may  not  take  advantage  of  the  statute,  because 
the  intent  of  the  statute  was  to  relieve  oppressed  debtors.  They 
alone  may  claim  its  protection,  and  declare  the  contract,  usurious 
in  its  inception,  void.''" 
Same — As  Applied  to  Bills  and  Notes. 

It  only  remains  to  apply  the  theories  of  usury  where  they  avoid 
the  instrument,  to  the  doctrines  of  bills  and  notes.  The  more  com- 
mon situations  to  which  the  rules  of  usury  have  been  applied  are 
these:  (1)  Where  an  instrument  is  usurious  in  its  inception;"'  (2) 
where  a  contract  is  valid  in  its  inception,  but  usury  is  alleged  in  a 
subsequent  indorsement  or  transfer  of  it;  (3)  where  one  indorser 
seeks  to  avail  himself  of  it  as  a  defense  where  either  the  note  had  a 
usurious  inception,  or  prior  indorsements  have  been  corrupted  by 
usur}. 

The  inception  of  the  instrument,  so  far  as  it  relates  to  usury,  la 
not  its  delivery.  In  such  cases  the  question  is  whether  the  person 
discounting  the  instrument,  and  taking  greater  than  the  legal  rate 

7  3  Jackson  v.  Henry,  10  .Johns.  19.j;   Elliott  v.  Wood.  53  Barb.  2S5. 

7  4  Dix  V.  Van  Wyck,  2  Hill  (N.  Y.)  522,  and  cases  cited. 

7  5  Farmers'  &  Mechanics'  Bank  v.  Joslyn.  37  N.  Y.  353;  Winsted  Bank  v. 
Webb,  39  N.  Y.  325,  476,  and  note;  Knig:hts  v.  Putnam,  3  Pick.  1S4:  Gates 
V,  First  Nat.  Bank,  100  U.  S.  239.  See,  also,  Ohio  &  M.  R.  Ck).  v.  Kasson,  37 
N.  Y.  218;  De  Wolf  v.  Johnson,  10  Wlieat.  3G7;  Ward  v.  Sugg,  113  N.  C. 
489.  8  S.  E.  717,  and  Johns.  Cas.  Bills  &  N.  1G3. 

7  6  isiason  V.  Lord,  40  N.  Y.  490. 

77  In  Townsend  v.  Bush,  1  Conrt  260,  one  who  was  a  party  to  the  Instru- 
ment in  question,  but  who  was  divested  of  his  interest  therein,  was  held  com- 
petent as  a  witness  to  prove  the  paijer  to  have  been  usurious  in  its  inception. 


Ch.   7]  REAL    AND    PERSONAL    DEFENSES.  231 

of  interest,  takes  it  from  a  person  who  at  the  time  of  such  discount 
could  have  maintained  an  action  upon  it  against  prior  parties  to 
the  instrument  itself.  For,  if  the  person  who  received  the  money 
upon  the  discount  of  the  instrument  could  not  have  maintained  an 
action  against  prior  parties,  then  these  prior  parties  must  be  deemed 
accommodation  parties,  and  the  instrument  has  its  legal  inception 
in  its  discount  with  the  party  who  deducts  greater  than  the  legal 
rate  of  interest. '^^ 

When  the  paper  is  usurious  in  its  inception,  then  it  is  void  as  to 
the  maker,  acceptor,  and  parties  prior  to  the  discount,  and  no  sub- 
sequent transaction  can  make  it  valid.''®  Void  in  its  inception,  it 
continues  void  forever,  whatever  its  subsequent  history  may  be. 
It  is  as  void  as  to  these  parties  in  the  hands  of  an  innocent  holder 
for  value  as  it  was  in  the  hands  of  those  who  made  the  usurious 
contract.     No  vitality  can  be  given  it  by  sale  or  exchange,  because 

7  8  Sweet  V.  Cbapman,  7  Hun,  576.  It  was  held  by  Noxon,  J.,  in  this  case 
that  "the  rule  appears  to  be  settled  that  a  promissory  note,  to  be  the  subject 
of  sale,  must  be  an  existing  valid  note  in  the  hands  of  the  payee,  and  given 
for  some  actual  considei-ation,  so  that  it  can  be  enforced  against  the  original 
parties,  and,  if  not  valid  in  the  hands  of  the  payee,  cannot  be  rendered  valid 
by  a  sale  to  a  bona  fide  purchaser  at  a  rate  of  interest  exceedmg  seven  per 
cent."  Hall  v.  Wilson,  16  Barb.  548;  Hall  v.  Earnest,  36  Barb.  5S8;  Rapelye 
V.  Anderson,  4  Hill  (N.  Y.)  483;  Bossange  v.  Ross,  29  Barb.  576;  Belden  v. 
Lamb,  17  Conn.  452;  Holeman  v.  Hobson,  8  Humph.  129;  Corcoran  v.  Pow- 
ers, 6  Ohio  St.  19;  Bock  v.  Lauman,  24  Pa.  St.  448;  Van  Schaack  v.  Staf- 
ford, 12  Pick.  5G5. 

T9  In  the  case  of  Lowe  v.  "Waller,  2  Doug.  736,  it  was  decided  that  the 
transaction  was  for  the  loan  of  money,  and  not  a  sale  of  goods;  and.  as  the 
sum  to  be  paid  exceeded  the  value  of  the  goods  and  five  per  cent,  interest, 
it  was  held  to  be  a  case  of  usui*y;  and  it  was  further  held  that  a  bill  of 
exchange  upon  a  usurious  consideration  is  void,  even  in  the  hands  of  an 
indorsee,  for  valuable  consideration,  without  notice  of  the  usui-y.  Where 
the  payee  of  a  bill  of  exchange  indorses  it  upon  a  usurious,  contract  at 
the  time  of  the  contract,  a  bona  fide  holder  cannot  afterwards  recover  upon 
it  against  the  acceptor.  Lowes  v.  Mazzaredo,  1  Starkie,  3S5.  As  to  the 
inile  when  there  is  no  usury  in  the  inception  of  the  bill,  see  Parr  v.  Eliason, 
1  East,  92,  and  Cardwell  v.  Martin,  9  East.  191.  Where  a  negotiable  instru- 
ment Is  free  from  usury  In  its  inception,  it  may  not  be  afterwards  tainted 
with  usury,  save  as  between  the  immediate  parties  thereto.  Knights  v.  Put- 
nam, 3  Pick.  (Mass.)  184. 


2o2  DEFENSES.  [Ch.   7 

that  which  the  statute  has  declared  void  cannot  be  made  valid  by 
passing  through  the  channels  of  trade.^° 

Where  the  instrument  is  not  usurious  in  its  inception,  but  is 
valid  as  between  the  drawer,  acceptor  or  maker  and  the  payee,  so 
that  the  latter  can  maintain  an  action  upon  it  against  the  former, 
then  the  bill  or  note  may  be  sold  by  the  payee  or  subsequent  in- 
dorsee to  the  purchaser  for  less  than  the  face  value,  less  the 
legal  rate  of  interest  for  the  time  the  paper  has  to  run.  This 
is  because,  if  the  paper  was  free  from  usury  in  the  begiiming, 
no  after-transaction  with  another  person  can,  as  respects  the  origi- 
nal parties,  invalidate  it.  So  that  the  face  of  the  paper  may  be 
recovered  by  the  indorsee  from  remote  and  prior  parties  to  valid 
paper,  untainted  with  usury  in  its  inception.^^  As  to  immediate 
parties  between  whom  less  than  the  face  of  the  bill  has  been  paid, 
the  relation  is  somewhat  different.  The  instrument  is  treated 
like  any  chattel,  the  discount  being  the  purchase  price.  If  the 
prior  immediate  party  is  sued,  then  he  may  show  just  what  he 
received  for  the  note  which  he  sold.^*  But  all  other  parties  may 
not  avail  themselves  of  this  reduction,  because  they,  by  virtue  of 
their  indorsement,  indemnify  for  the  face  of  the  instrument  itself. 
They  stand  in  the  relation  of  indorsers,  whereas  the  immediate 
party,  who  has  received  less  than  the  face  of  the  bill,  stands  in 

80  Claflin  v.  Boorum,  122  N.  Y.  385,  25  N.  E.  360;  Powell  v.  Waters,  8  Cow. 
6G9;  Wilkie  v.  Roosevelt,  3  Johns.  Cas.  206:  Bennett  v.  Smith,  15  Johns. 
335-357;  Miller  v.  Hull,  4  Denio,  104,  107;  MiUer  v.  Zeimer.  Ill  N.  Y.  441- 
444,  18  N.  E.  716;  Lowe  v.  Waller,  2  Doug.  736;  Lowes  v,  Mazzaiedo,  1 
Starkie,  385.  In  this  case  it  was  held  that,  where  the  payee  of  a  bill  of 
exchange  indorses  it  upon  a  usurious  contract  at  the  time  of  the  contract, 
a  bona  fide  holder  cannot  afterwards  recover  upon  it  against  the  acceptor. 
Chapman  V.  Black,  2  Barn.  &  Aid.  590. 

81  Crane  v.  Price,  35  N.  Y.  494;  Corning  v.  Pond,  29  Hun,  129;  Nichols  y. 
Fearson,  7  Pet.  109;  Newman  v.  Williams,  29  Miss.  222;  French  v.  Grindle, 
15  Me.  103. 

8  2  Munn  V.  Commission  Co.,  15  Johns.  44;  Ingalls  v.  Lee,  9  Barb.  651; 
Cram  v.  Hendricks,  7  Wend.  569;  Noble  v.  Walker.  32  Ala.  456;  Coye  v. 
Palmer,  16  Cal.  158;  French  v.  Grindle.  15  Me.  163.  But  this  doctrine  has 
been  sharply  criticised,  and  is  doubted.  Roark  v.  Turner,  29  Ga.  455;  Na- 
tional Bank  v.  Green,  33  Iowa,  140;  Nichols  v.  Fearson,  7  Pet.  103;  Belden 
V.  Lamb,  17  Conn.  441;  Turner  v.  Brown,  3  Smedes  &  M.  425. 


Ch.    T}  REAL    AND    PERSONAL    DEFENSES.  2o3 

the  position  of  a  person  selling  a  chattel."  When  one  indorsee 
receives  the  note  from  an  indorser,  which  is  void  as  against  the 
maker  or  prior  parties  for  usury,  he  may  recover  from  his  indorser 
the  amount  paid  upon  the  indorsement.  This  is  because  the  in- 
dorsement amounted  to  a  new  and  independent  contract  between 
such  indorser  and  indorsee,  and  the  usury,  which  was  a  defense 
to  the  acceptor  or  maker,  was  no  defense  as  to  them.  In  other 
words,  the  indorser  warranted  the  bill  or  note,  and  was  estopped 
from  setting  up  the  defense  of  usury,  so  that  suit  might  be  main- 
tained upon  the  theory  of  implied  warranty  and  recovery  might 
be  had  for  the  amount  or  consideration  which  he  paid  his  immedi- 
ate indorser. 

While  we  have  endeavored  to  formulate  in  a  concise  way  the 
most  logical  theories  concerning  the  transfer  of  negotiable  instru- 
ments, the  student  is  cautioned  that  there  is  great  confusion  in 
the  adjudged  cases  in  the  different  states  of  the  Union.  This  is 
particularly  true  in  cases  involving  indorsements  aifected  by  usury. 
As  a  matter  of  theory,  the  position  taken  by  the  text  writers  Daniel 
and  Parsons  '*  seems  the  most  logical  and  most  to  be  commended. 
It  is  that  an  indorsee  discounting  paper  for  more  than  the  legal 
rate  allowed  may  hold  all  parties  liable  for  its  face.  The  reason  for 
this  is  that  the  statutes  against  usury  must  be  strictly  construed. 
They  interdict  excessive  interest  for  the  loan  of  money.  An  in- 
dorsement is  not  a  loan  of  money.  The  indorser  does  not  cash  his 
own  promise  to  pay  money.  He  cashes  such  a  promise  made  by 
some  one  else  with  a  guaranty  or  promise  of  indemnity  of  his  own 
superadded.  It  is  no  more  a  usurious  transaction  than  it  would 
be  for  them  to  sell  a  piece  of  land  with  a  warranty  on  their  part 
that  it  was  what  it  pretended  to  be.  Such  a  contract  is  not  a 
loan,  and  not  within  the  strict  construction  of  the  statute  of  usury. 

8  3  Sherman  v.  Blackman,  24  111.  345;  Lloyd  v.  Konch,  2  Conn.  175:  Ayer 
V.  Tilden,  15  Gray,  178;  Cameron  v.  Cbappell,  24  Wend.  94;  Kice  v.  Mather, 
3  Wend.  62. 

s*  Daniel.  Neg.  Inst.  §  7G8;   2  Pars.  Notes  &  B.  429.  430. 


234  DEFENSES.  [Ch.  7 

103.  ALTERATION  AND  FORGERY.— The  defenses  in- 
terposed where  the  instrument  is  altered  in  a  material 
respect  or  forged  are  called  "material  alteration"  or 
"forgery." 

104.  ALTERATION — Is  changing  in  any  respect  the 
terms  of  an  executed  negotiable  instrument  by  a  party 
thereto  without  the  assent  of  the  other  parties. 

105.  A  material  alteration  avoids  the  instrument,  be- 
cause, as  altered,  it  no  longer  represents  the  agreement 
among  the  parties. 

106.  An  immaterial  alteration  is  one  which  does  not 
change  the  tenor  of  the  instrument.  It  does  not  avoid 
the  instrument. 

The  reason  that  a  material  alteration  of  a  negotiable  instrument 
discharges  a  party  who  does  not  consent  thereto  is  that  it  destroys 
the  identity  of  the  contract,  and  substitutes  an  agreement  different 
from  that  into  which  the  parties  entered.*^  It  is  immaterial 
whether  the  intent  with  which  the  alteration  was  made  was  fraudu- 
lent or  not.^^  And,  though  the  doctrine  of  the  leading  case  "  on 
the  subject  shows  that  the  reason  which  influenced  the  court  of 
king's  bench  was  that  they  considered  an  alteration  in  itself  fraudu- 
lent, the  present  and  probably  wiser  reason  is  that  the  party  never 
assented  to  the  liability  called  for  in  the  altered  instrument,  and 
therefore  the  courts  will  not  enforce  it  against  him.  In  England 
this  theory  is  carried  in  the  early  cases  to  extreme  limits.      They  ** 

85  Wood  V.  Steele,  6  Wall.  80;  Ansle  v.  Insurance  Co.,  92  U.  S.  330:  Mers- 
man  v.  Werges,  5  Sup.  Ct.  65,  112  U.  S.  139;  Gi-eenfield  Sav.  Bank  v.  Stowell, 
123  Mass.  196. 

86  Booth  V.  Powers,  56  N.  Y.  22;  Evans  v.  Foreman,  60  Mo.  440;  Heath  v. 
Blake,  5  S.  E.  842,  28  S.  C.  406.  See,  contra.  Van  Brunt  v.  Eoff,  35  Barb.  501. 
In  cases  of  ordinary  contract  for  necessity  of  fraudulent  intent,  see  Horst 
V.  Wagner,  43  Iowa,  373;  Rogers  v.  Shaw,  59  Cal.  260;  Cochran  v.  Nebeker, 
48  Ind.  459;  Nickerson  v.  Swett,  135  Mass.  518;  Neff  v.  Horner,  03  Pa.  St. 
330. 

87  Master  v.  Miller,  4  Term  R.  320,  2  H.  Bl.  140. 

88  Davidson  v.  Cooper,  11  Mees.  &  W.  795,  13  Mees.  &  W.  343:  Pattlnson 
V.  Luckley,  L.  R.  10  Exch.  330,  44  Law  J.  Exch.  180;  Pigot's  Case,  11 
Coke,  27. 


Ch.   7]  EEAL    AND    PERSONAL    DEFENSES.  235 

maintain  that  even  though  the  alteration  be  made  by  a  stranger, 
and  the  parties  to  a  contract  be  innocent  of  it,  nevertheless  the  con- 
tract is  void,  and  will  not  be  enforced.  But  an  examination  of 
these  early  authorities  shows  that  they  originated  in  and  depended 
upon  distinctions  and  theories  of  pleading,  and  there  is  certainly  no 
reason  except  that  of  stare  decisis  why  it  should  now  be  the  law. 
In  America,  an  early  departure  from  this  doctrine  was  taken.^*  An 
alteration  by  a  stranger  was  regarded  as  a  mere  spoliation.  The 
burden  of  proof  to  show  that  the  alteration  was  not  made  by  the 
party  seelcing  to  recover,  or  by  those  under  whom  he  claimed,  nor 
with  his  or  their  privity  or  consent,  was  cast  upon  the  party  produ- 
cing the  instrument  or  seeking  to  recover  upon  it.  Upon  this  being 
shown,  the  contents  of  the  original  instrument,  if  they  could  be  as- 
certained, were  enforced.     The  instrument  was  not  declared  void. 

This  is  in  accord  with  the  fundamental  principles  of  contract. 
Equally  so  are  those  which  hold  that  alterations  made  with  the 
knowledge  or  consent  of  the  parties,  or  which  do  not  change  the  ef- 
fect or  tenor  of  the  instrument,  do  not  affect  the  validity,  where 
the  parties  know  and  assent  to  the  change,  and  derive  any  benefit 
from  it.  It  is  a  new  contract  upon  a  new  consideration,  and  there- 
fore in  itself  valid.  Where  there  is  no  benefit  derived  from 
either  party  by  the  change,  and  yet  they  have  knowledge  of  and  as- 
sent to  the  change,  each  party  makes  the  person  making  the  change 
his  agent,  and  ratifies  his  act.*"  Where  the  legal  effect  of  the  in- 
strument is  not  changed  by  an  alteration,  the  alteration  is  immate- 
rial. The  liability  sought  to  be  enforced  against  the  party  is  the 
one  which  he  in  the  first  place  assumed.  The  fact  that  the  verbiage 
or  appearance  of  the  instrument  is  changed  is  unimportant.     The 

89  Rees  V.  Overbaugh,  6  Cow.  746;  Lewis  v.  Payn,  8  Cow.  71;  Nichols  v. 
Johnson,  10  Conn.  192;  Wiclies  v.  Caulk,  5  Har.  &  J.  36;  Den  v.  Wright,  7 
N.  .7.  Law  (2  Halst.)  176;  Waring  v.  Smyth,  2  Barb.  Ch.  119.  See,  also. 
Bridges  v.  Winters,  42  Miss.  135;  Piersol  v.  Grimes,  30  Ind.  129;  Hunt  v. 
Gray,  35  N.  J.  Law,  227;  Lubbering  v.  Kohlbrecher,  22  Mo.  596;  Drum  v. 
Drum,  133  Mass.  508. 

90  National  State  Bank  v.  Rising,  4  Hun,  793;  Commercial  Bank  of  Buffalo 
V.  Warren,  15  N.  Y.  577;  Greenfield  Bank  v.  Crafts,  4  Allen,  447;  Hunting- 
ton V.  Ballon,  2  Lans.  120;  Humphreys  v.  Guillow,  13  N.  H.  385;  Bell  v. 
Mahin,  69  Iowa,  408,  29  N.  W.  331;  Camden  Bank  v.  Hall,  14  N.  J.  Law.  583; 
Jackson  v.  Johnson,  67  Ga.  167;    Canon  v.  Grigsby,  116  111.  151,  5  N.  E.  362. 


236  DEFENSES.  [Cll.   7 

courts  look  to  the  obligation,  and,  if  that  be  unaltered  in  effect,  then 
it  is  enforced.  The  courts  will  not  allow  justice  to  be  obstructed, 
for  the  light  reason  that  the  form  of  the  agreement  is  altered  when 
its  substance  remains. 

107.  Alterations  are  material: 

(a)  Which  lessen  or  place    an    additional   burden 

on  any  of  the  parties.  Such  are  changes  in 
the  date,  time,  place,  amount,  or  medium 
of  payment  and  the  rate  of  interest. 

(b)  Which  change   the  liabilities  and  obligations 

of  all  or  any  of  the  parties.  Such  are  the 
addition  or  removal  of  the  signature  of  a 
maker,  drawer,  indorser,  payee,  or  co- 
surety. 

(c)  Which    change    the    operation   of  the   instru- 

ment, or  its  effect  in  evidence.  Such  are 
adding  -words  of  negotiability  or  of  a  spe- 
cial consideration  after  value  received,  or 
changing  the  form  of  the  indorsement,  or 
changing  the  liability  from  joint  to  several, 
or  from  joint  to  joint  and  several,  as  the 
case  may  be. 

The  absence  of  a  date  upon  a  negotiable  instrument  at  its  incep- 
tion, or  the  fact  that  it  is  postdated  or  antedated,  may  not  be  mate- 
rial upon  the  question  of  its  validity.  But  when  a  date  has  once 
been  inserted,  and  its  time  of  payment  has  thus  been  fixed,  such 
date  is  material,  and  cannot  be  altered  without  consent.®^     The  rea- 

e*!  Stephens  v.  Graham,  7  Serg.  &  R.  503;  Walton  v.  Hastings,  4  Camp.  223; 
Jacobs  V.  Hart,  2  Starkie,  45;  Outhwaite  v.  Luntley,  4  Camp.  170;  Master  v. 
Miller,  4  TeiTn  R.  320  (in  this  case  it  was  held  that  an  alteration  of  the  date 
of  a  bill  of  exchange,  after  acceptance,  whereby  the  payment  would  be  ac- 
celerated, avoids  the  instrument,  and  no  action  can  be  maintained  upon  it, 
even  by  an  innocent  holder  for  valuable  consideration);  Britton  v.  Dierker, 
46  Mo.  592;  O wings  v.  Arnot,  33  Mo.  406;  Crawford  v.  West  Side  Bank,  2  N. 
E.  881,  100  N.  Y.  50.  In  Langton  v.  Lazarus,  5  Meas.  &  W.  029,  which  was 
an  action  in  assumpsit  by  the  indorsee  against  the  acceptor  of  a  bill  of  ex- 


Ch.   7j  REAL    AND    PERSONAL    DEFENSES.  237 

son  for  this  is.  in  the  words  of  .Justice  Swayne,®^  that  "the  agree- 
ment is  no  longer  the  one  into  which  the  parties  entered.  Its  iden- 
tity is  changed.  Another  is  substituted.  There  is  no  longer  the 
necessary  concurrence  of  minds.  To  prevent  and  punish  such  tam- 
pering, the  law  does  not  permit  the  holder  to  fall  back  upon  the  con- 
tract as  it  was  originally.  In  pursuance  of  a  stern,  but  wise,  policy, 
it  annuls  the  instrument  as  to  the  party  sought  to  be  wronged.  The 
date  is  obviously  a  material  part  of  the  order  or  promise.  It  indi- 
cates the  time  of  its  inception.  It  shows  the  time  of  its  perform- 
ance. And  its  alteration  places  an  unjust  burden  and  a  liability 
upon  the  wronged  party  which  the  law  will  not  enforce.  For  much 
the  same  reason,  an  alteration  in  a  note  or  bill  which  changes  the 
time  of  its  payment  is  material,  and  discharges  those  parties  to  it 
who  did  not  authorize  the  change.®^  This  is  true  whether  the  pay- 
ment is  hastened  or  delayed.  It  is  no  argument  that  such  accelera- 
tion or  delay  may  be  a  benefit  to  the  acceptor,  maker,  or  indorsers, 
in  any  particular  case;  for,  if  this  tampering  with  instruments 
were  permitted,  there  would  be  no  certain  time  for  the  acceptor  or 
maker  to  have  his  funds  at  a  given  place,  nor  for  the  indorsers  to  be 
on  the  alert  to  see  that  the  payment  was  made,  and  to  protect  them- 
selves if  it  were  not.  A  change  in  the  instrument  in  respect  to  its 
time  of  payment  would  place  the  burden  of  constant  inquiry  upon 
the  parties  liable  for  its  payment.  This  reasoning  also  applies 
where  the  place  of  payment  is  obliterated,  or  where  a  place  of  pay- 
ment is  inserted,  or  where  the  place  of  payment  is  otherwise  altered. 

change,  It  was  pleaded  as  a  defense  that  before  the  bill  came  due,  and  while 
it  was  "in  full  force  and  effect,"  the  date  was  altered  by  the  drawer,  whereby 
it  became  void.  The  plea  was  held  bad,  but  only  for  the  reason  that  it  did 
not  allege  the  alteration  to  have  been  made  after  acceptance. 

9  2  Wood  V.  Steele,  6  Wall.  SO. 

9  3  Lee  V.  Murdoch,  4  Pat.  App.  261;  Long  v.  Moore,  3  E.sp.  155,  note.  In 
the  case  of  Alderson  v.  Langdale,  3  Barn.  &  Adol.  660,  the  vendee  of  goods 
paid  for  them  by  a  bill  of  exchange  drawn  by  him  on  a  third  person;  and, 
after  it  had  been  accepted,  the  vender  altered  the  time  of  payment  mentioned 
in  the  bill,  and  thereby  vitiated  it.  It  was  held  that  by  so  doing  he  made 
the  bill  his  own,  and  caused  it  to  operate  as  a  satisfaction  of  the  original  debt, 
and  consequently  that  he  could  not  recover  for  the  goods  sold.  Miller  v. 
Gilleland,  19  Pa.  St.  119;  Lewis  v.  Kramer,  3  Md.  265;  Bathe  v.  Taylor,  15 
East,  412;    Benedict  v.  Miner,  58  111.  19;    Lisle  v.  Rogers,  IS  B.  Mon.  52S. 


238  DEFENSES.  [Cll.   7 

Properly  enough,  Ibe  law  does  not  permit  even  a  bona  fide  holder 
to  recover  upon  a  bill  or  note  so  altered  against  the  parties,  prior  to 
the  one  making  the  alteration."*  The  place,  as  well  as  the  time, 
of  payment,  are  essential  and  material  parts  of  the  contract  entered 
into;  for  on  their  proximitj'  or  remoteness  must  depend,  in  point  of 
time,  the  indorser's  knowledge  of  nonpa^^nent,  which  in  most  cases 
must  be  to  him  a  matter  of  great  importance.  He  cannot  be  char- 
ged with  liability  unless  payment  of  the  instrument  is  demanded  at 
the  time  when  and  the  place  where  it  is  due;  and,  when  this  is 
changed  without  the  indorser's  consent,  he  is  subjected  to  new  and 
unexpected  liabilities,  and  in  fact  a  new  contract  is  made  for  him, 
to  which  he  is  not  a  party.* "^ 

The  amount  to  be  paid  by  the  instrument  cannot  be  changed, 
either  by  lessening  or  increasing  it,  without  destroying  the  contract. 
Under  this  rule  there  can  be  no  lessening  or  increasing  the  amount 
of  principal, °^  nor  adding  words  varying  the  interest  to  be  paid  on 

6  4  Cowie  V.  Halsall,  4  Barn.  &  Aid.  197,  3  Starkie,  36;  Rex  v.  Treble,  2 
Taunt.  328;  Tidmarsh  v.  Grover,  1  Maiile  &  S.  735;  Nazro  v.  Fuller,  24  Wend. 
374;  Sudler  v.  Collins,  2  Houst.  538;  Burchfield  v.  Moore,  25  Eng.  Law  &  Eq. 
123;  Morehead  v.  Parkersburg  Nat.  Bank,  5  W.  Ya.  74;  Macintosh  v.  Hay- 
don,  Ryan  &  M.  3G2;  Hill  v.  Cooley,  46  Pa.  St.  259;  White  v.  Haas,  32  Ala. 
i30;    Oakey  v.  Wilcox,  3  How.  (Miss.)  330. 

»5  Woodworth  v.  Bank  of  America,  19  Johns.  391;  Wolcott  v.  Santvoord,  17 
Johns.  248;    Nazro  v.  Fuller,  24  Wend.  374. 

86  Goodman  v.  Eastman,  4  N.  H.  4.55;  Bank  of  Commerce  v.  Union  Bank, 
3  N.  Y.  230;  Stephens  v.  Graham,  7  Serg.  &  R.  505.  In  the  case  of  Citizens' 
Nat.  Bank  v.  Richmond,  121  Mass.  110,  the  facts  were  as  follows:  A  note 
was  Indorsed  for  the  maker's  accommodation.  Afterwards  the  maker,  by 
means  of  chemicals,  removed  the  original  amount  of  the  note,  and  inserted 
a  larger  amount,  for  which  he  got  the  note  discounted.  Before  the  note  was 
due,  the  alteration  was  discovered,  and  the  original  writing  restored.  The 
note  was  protested,  and  action  brought  against  the  indorser  for  the  first 
amount.  He  was  held  not  to  be  liable.  "The  defendant  never  made  the  note 
for  $2,000,  which  was  the  only  one  that  the  plaintifC  accepted."  (Per  Curiam.) 
See,  also.  Young  v.  Grote,  4  Bing.  253.  A  check  drawn  by  a  customer  upon 
his  banker  for  a  sum  of  money  described  in  the  body  of  the  check  in  words 
and  .figures  was  afterwards  altered  by  the  holder,  who  substituted  a  larger 
sum  for  that  mentioned  in  the  check,  in  such  a  manner  that  no  one  in  the 
ordinary  course  of  business  could  observe  it.  The  banker  paid  to  the  holder 
this  larger  sum.  It  was  held  that  he  could  not  charge  the  customer  'beyond 
the  sum  for  which  the  check  was  originally  drawn.     Hall  v.  Fuller,  5  Barn. 


Ch.  7]  REAL  AND  PEUSONAL  DEFENSES.  289 

a  bill  or  note,  either  by  changing  the  per  cent,  or  adding  interest 
where  the  bill  or  note  did  not  before  provide  for  any;  ®^  nor  by  alter- 
ing the  currency  in  which  payment  is  to  be  made,  or,  if  the  bill  or 
note  is  payable  in  merchandise,  modifying  the  character  or  quality 

&  C.  750.  In  the  case  of  IMarine  Nat.  Bank  v.  National  City  Bank,  59  N.  Y. 
67,  it  was  tield  that  where  a  check  which  had  been  altered  as  "to  name  of 
payee,  date,  and  amount  had  been  certified,  and  afterwards  paid  by  the  plain- 
tiff, such  amount  could  be  recovered  back  as  money  paid  through  mistake. 
But  in  the  case  of  Pagan  v.  Wylie,  Mor.  Diet.  1660,  a  bill  which  was  accepted 
and  indorsed  was  given  to  the  drawer.  By  filling  up  certain  blank  spaces, 
he  altered  the  amount  of  the  bill  from  £8  to  £84.  It  was  held  by  the  court 
that  where  a  blank  space  is  left  in  a  bill,  large  enough  to  allow  of  the  in- 
sei'tion  of  words  or  parts  of  words,  any  one  who  puts  his  name  upon  it  as 
drawer,  indorser,  or  acceptor,  and  gives  it  to  the  hand  of  another,  is  liable 
in  the  same  way  as  though  the  sum  had  been  left  entirely  blank.  In  Brown 
V.  Reed,  79  Pa.  St.  370,  the  note  in  question  had  formed  originally  part  of  a 
contract  so  drawn  that  by  cutting  off  a  part  of  it  a  negotiable  note  was  left. 
It  was  held  that,  where  the  maker  of  a  negotiable  instrument  executes  it  so 
negligently  as  to  admit  of  easy  alteration,  he  will  be  held  liable  to  a  bona 
fide  holder  who  has  taken  it  before  maturity  in  the  ordinary  course  of  busi- 
ness. 

9T  Boalt  V.  Brown,  13  Ohio  St.  364;  Waterman  v.  Vose,  43  Me.  504;  Lee 
V.  Starbird,  55  Me.  491;  Neff  v.  Horner,  63  Pa.  St.  327;  Dewey  v.  Reed,  40 
Barb.  16;  Brown  v.  Jones,  3  Port.  420;  Whitmer  v.  Frye,  10  Mo.  348;  Fay 
V.  Smith,  1  Allen,  477;  Patterson  v.  McNeeley,  16  Ohio  St.  348;  McGrath  v. 
Clark,  56  N.  Y.  34.  In  this  case  a  promissory  note  was  Indorsed  by  the  de- 
fendant, but  with  time  and  place  of  payment  left  blank.  Upon  its  deliv- 
ery to  him,  the  maker,  having  filled  in  the  blanks,  added  the  words  "with  in- 
terest." It  was  held  that,  by  delivery  to  him,  the  maker  was  authorized  to 
fill  in  the  blanks  as  to  time  and  place,  as  he  wished,  but  that  the  addition 
of  the  "with  interest"  was  not  authorized,  and  was  such  a  material  alteration 
as  would  invalidate  the  note,  unless  proof  of  authority  beyond  the  mere 
fact  of  delivery  be  shown.  "The  addition  of  the  words  'with  interest'  in- 
creased the  liability  of  the  indorser;  and  the  maker  had  no  more  right  to  add 
those  words  than  he  had  to  increase  the  sum  for  which  the  note  was  given 
by  adding  the  amount  of  the  interest  to  it  for  the  time  the  note  had  to  run." 
Per  Church,  C.  J.  Where  a  payee  or  subsequent  holder  added  after  the  printed 
words  "with  interest  at,"  at  the  end  of  a  promissory  note,  the  following: 
"10  per  cent.," — without  knowledge  of  the  maker.  It  was  held  that  such 
alteration  would  constitute  a  good  defense  by  the  maker  against  a  bona  fide 
purchaser,  and  would  invalidate  the  note.  Holmes  v.  Tnimper,  22  Mich.  427. 
Ivory  v.  Michael,  33  Mo.  398;  Warrington  v.  Early,  2  EL  &  Bl.  763;  Sutton 
V.  Toomer.  7  Bam.  &  C.  416. 


240  DEFENSES.  [Cll.    7 

of  the  goods."  The  reason  for  these  rules  is  that,  if  the  amount  to 
be  paid  is  increased  or  lessened, — the  identity  of  the  contract  is  de- 
stroyed. If  interest  is  added,  it  adds  to  the  burden  borne  by  the 
parties;  if  diminished,  the  effect  of  the  contract  is  changed;  and, 
since  there  might  be  cases  where  injury  would  be  wrought,  the  policy 
of  the  law  will  not  permit  such  change.  The  question  to  be  deter- 
mined is  whether  the  words  added  or  stricken  out  were  mere  surplus- 
age, or  whether  they  were  material  to  the  obligation  assumed  by  the 
parties  to  the  contract.  The  materiality  turns  upon  the  evident 
intent  of  the  parties,  and  whether  the  change  was  in  furtherance  of 
that  intention.  The  test  is  whether  the  legal  damages  contemplated 
by  the  parties  were  the  same  as  those  to  be  awarded  by  the  contract 
in  its  changed  condition. °^ 

The  doctrine  of  the  so-called  "Piggot's  Case,"  ^"'^  whichisthesource 
of  the  doctrine  of  alteration,  has  been  extended  to  every  situation 
where  instruments  are  presented  or  sought  to  be  used  as  evidence 
for  the  enforcement  of  an  unexecuted  obligation  or  contract.  If 
there  is  added  or  withdrawn  another  maker  or  drawer,  or  if  a  person 
signs  or  withdraws  his  name  as  a  surety  to  a  note  or  bill  after  it  is 
executed,  such  addition  or  withdrawal  creates  a  new  contract. 
Hence  such  change  is  a  material  alteration. ^"^  In  such  case,  too, 
it  is  not  to  the  point  that  the  alteration  be  or  be  not  to  the  prejudice 
of  the  party  against  whom  the  liability  is  sought  to  be  enforced. 
The  courts  will  not  compel  the  execution  of  a  contract  which  the 
parties  have  never  made.  They  will  not  sit  in  judgment  upon  the 
question  whether  it  be  to  the  prejudice  of  the  party  aggrieved  or 
QQ^  102  rpjjjg  jg  also  true  where  the  operation  or  effect  of  the  instru- 
ment is  changed,  and  it  operates  differently  from  the  original  instru- 
ment.    If,  for  example,  a  promissory  note,  negotiable,  and  for  the 

98  Darwin  v.  Rippey,  63  N.  O.  318;    State  v.  Cilley,  quoted  in  1  N.  H.  97; 
Martoudale  v.  Follett,  1  N.  H.  95;   Scliwalm  v.  Mclntyre,  17  Wis.  232. 
»»  Church  V,  Howard,  17  Hun.  5. 

100  11  Coke.  27. 

101  Clai'lc  V.  Blackstock,  Holt,  N.  P.  474;  Ex  parte  White,  2  Deac.  &  C. 
334;  Bank  of  Limestone  v.  Penick,  5  T.  B.  Mon.  25;  Pulliam  v.  Withers, 
8  Dana,  98;   Gardner  v.  Walsh,  32  Eng.  Law  &  Eq.  162. 

102  Chappell  v,  Spencer,  23  Barb.  584;  Montgomery  v.  Crossthwait,  8 
South.  498,  Johns.  Cas.  Bills  &  N.  154,  and  90  Ala.  553. 


Ch.    7]  REAL    AND    PERSONAL    DEE'ENSES.  241 

payment  of  a  sum  of  money  absolutely  on  its  face,  is  modified  and 
loses  its  negotiability,  so  that  it  is  converted  into  a  special  contract, 
the  alteration  is  material,  and  avoids  the  instrument.^"'  Where 
there  are  memoranda  upon  the  instiniment  which  qualify  it,  and  are 
intended  as  a  substantive  part  of  it,  and  these  are  changed,  the  alter- 
ation is  material.^"*  So,  also,  ingrafting  upon  a  joint  note  a  several 
obligation,  or  changing  a  joint  and  several  to  a  joint  note,  destroys 
the  operation  of  the  original  contract,  and  renders  it  void. 

It  is  perhaps  proper  to  add  to  the  foregoing  rules  a  statement  of 
the  way  they  are  limited  in  their  operation.  The  rule,  briefly  stated, 
is  that  where  the  party  complaining  of  the  alteration  has  by  his  neg- 
ligent conduct  made  the  alteration  possible,  so  that  the  alteration 
can  be  so  made  either  by  alteration  or  erasure  as  not  to  excite  the 
suspicion  of  a  careful  man,  the  aggrieved  party  will  be  liable  upon 
it  to  a  bona  fide  holder.  This  is  because  a  maker,  by  putting  his 
paper  in  circulation,  has  in\ited  the  public  to  receive  it  if  any  one 
has  it  in  possession  with  apparent  title  to  it.  And  he  is  estopped 
to  urge  the  actual  defect  of  title  against  a  bona  fide  holder.""* 

108.  FORGERY. — Forgery  of  a  negotiable  instrument,  or 
the  indorsement  thereon,  except  in  case  of  ratification  or 
estoppel,  nullifies  the  instrument  as  to  all  parties  against 
■whom  the  forgery  is  committed. 

Forgery  means  either  falsely  making,  counterfeiting,  altering,  eras- 
ing or  obliterating  a  genuine  negotiable  instrument,  in  whole  or  in 

103  Hartley  v.  Wilkinson,  4  Maule  &  S.  25;  Cholmeley  v.  Darley,  14  Mees. 
&  W.  343;   Leeds  v.  Lancashire,  2  Camp.  205. 

104  Benedict  v.  Cowden,  49  N.  Y.  396;  Johnson  v.  Heagan,  23  Me.  329; 
Burchfield  v.  Moore,  3  El.  &  Bl.  6S3:  Simpson  v.  Stackhouse,  9  Pa.  St.  (9 
Barr.)  ISG;  Wheelock  v.  Freeman,  13  Pick.  165.  In  the  case  of  Wait  v. 
Pomeroy,  20  Mich.  425,  a  memorandum  which  was  written  under  a  note, 
and  by  which  the  obligation  was  qualified,  was  shown  to  have  been  de- 
stroyed, and  it  was  held  that  by  such  destruction  a  note,  even  though  In  the 
hands  of  a  bona  fide  holder,  is  vitiated.  "If  it  formed  a  part  of  the  original 
contract,  it  was  a  material  alteration  to  detach  the  memorandum,  and  leave 
the  note  as  if  it  had  been  absolute.  And  it  is  a  principle  well  settled  that 
such  an  alteration  avoids  the  entire  instrument."     Per  Campbell,  C.  J. 

106  Van  Duzer  v.  Howe,  21  N.  Y.  531. 
KEG.  BILLS 16 


242  iJefenses.  [Ch.  7 

part,  or  the  false  making  or  counterfeiting  of  the  signature  of  a  party 
thereto,  with  intend  to  defraud.^ °^  Its  essential  elements  are  intent 
to  defraud,^"^  the  forging  of  the  instrument,  and  its  utterance  or  de- 
livery by  the  forger,"^  In  some  of  its  aspects  it  is  closely  akin  to  al- 
teration, but  is  distinguished  from  it  in  that  its  essential  element  is 
fraudulent  intent,  while  material  alterations  may  be  innocently  made. 
If  innocently  made,  though  the  alteration  be  material,  recovery  can  be 
had  upon  the  original  consideration,  but,  if  fraudulently  made,  and  the 
alteration  be  material,  no  recovery  can  be  had  upon  the  instrument  or 
upon  the  consideration.^""  This  rule,  though  harsh,  is  deemed  wise, 
all  things  considered,  because  forgery  ought  to  shut  the  doors  of 
courts  to  the  forger.  It  is  deemed  the  wisest  policy  to  punish  his 
fraud  by  causing  him  to  lose  all  remedy  for  the  enforcement  of  his 
rights.  And  this  consideration  does  not  outweigh  in  the  mind  of 
courts  the  other  one  that  the  debtor  gains  all  there  is  in  the  transac- 
tion by  the  fraud  of  the  creditor. 

Forgery  creates  no  legal  right  or  obligation  against  the  party 
whose  name  is  forged,  even  though  the  instrument  be  sought  to  be 
enforced  by  a  purchaser  for  value  without  notice.^^**  The  forgery 
is  in  no  wise  the  legal  act  of  this  party.  It  is  the  act  of  some  one 
else  personating  him  without  authority.  In  case  of  an  Indorser 
there  is  the  further  reason  that  to  transfer  or  to  derive  a  legal  title 
to  an  instrument  it  is  necessary  to  prove  the  handwriting  of  the 

106  Pen.  Code  N.  Y,  §  520. 

107  Daniel,  Neg.  Inst.  §  1349;  Edw.  Bills  &  N,  §  2G8;  People  v.  D'Argencour, 
32  Hun.  178,  affirmed  95  N.  Y.  624;  Phelps  v.  People,  72  N.  Y.  371. 

108  Daniel,  Neg.  Inst.  §  1350. 

108  Booth  V.  Powers,  56  N.  Y.  22;  Meyer  v.  Huncke,  55  N.  Y-  412:  Ken- 
nedy V.  Crandell,  3  Lans.  1;  Trow  v.  Glen  Cove  Stirch  Co.,  1  Daly.  280; 
Blade  v.  Noland.  12  Wend.  173;  Clute  v.  Small,  17  Wend.  238;  Atkinson  v. 
Hawdon,  2  Adol.  &  El.  628  (in  this  case  it  was  held  that  if  the  drawer  sues 
the  acceptor  upon  the  bill,  and  fails  in  consequence  of  having  altered  the 
bill  in  a  material  part,  he  may  still  recover  upon  tb.e  counts  on  the  original 
consideration);  Hunt  v.  Gray,  35  N.  J.  Law,  227;  Vogle  v.  Ripper,  34  111. 
100;  Matteson  v.  Ellsworth,  33  Wis.  488.  See,  contra,  Martendale  v.  Fol- 
lett,  1  N.  H.  99;   Bigelow  v.  Stilphen,  35  Vt.  525. 

110  In  the  case  of  Smith  v.  Sheppard,  Chit.  Bills  (10th  Ed.)  note,  it  was 
said  by  Lord  Mansfield  that  "he  that  takes  a  forged  bill  must  abide  by  the 
consequence,  for  the  man  whose  name  is  forged  knows  nothing  of  it" 


Ch.  7]  REAL    AND    PERSONAL    DEFENSES. 


243 


payee.  Unless  this  is  done,  title  does  not  pass.^"  So  that,  except 
in  case  of  ratification  or  estoppel,  in  no  event  is  a  maker,  acceptor, 
drawer,  or  indorser  liable  upon  an  instrument  forged  as  to  him. 
Ratification  and  estoppel,  however,  take  the  case  irom  the  operation 
of  the  rule.  Ratification  means  the  adoption  by  a  party  of  a  forged 
signature  as  his  own.  Estoppel  means  the  refusal  to  allow  a  party 
to  deny  a  forged  signature  purporting  to  be  his  because  by  his  words 
or  conduct  he  has  induced  some  other  party  to  the  instrument  to 
act  to  his  detriment  upon  the  belief  that  the  forged  signature  is  a 
valid  one.  Ratification  binds  the  party  because,  according  to  the 
general  principles  of  contract  as  adopted  in  this  country,  a  ratifica- 
tion made  with  full  knowledge  binds  a  principal  although  no  ante- 
cedent authority  was  given.^^^  For  there  is  no  sufiicient  reason 
why,  upon  the  fact  of  forgery  alone,  a  person  whose  name  has  been 
forged  may  not  adopt  and  affirm  the  forgery  or  signature  as  his  own 
act  and  thereby  subject  himself  to  whatever  civil  liability  may  fol- 
low it."*  Estoppel  binds  the  party  because  his  treating  the  instru- 
ment as  genuine  fixes  the  right,  and  he  may  not  overset  the  right  by 
afterwards  disputing  it.  Thus  if  the  maker  of  a  note  or  the  drawer 
of  a  bill  issues  it  to  a  bona  fide  holder  with  forged  or  fictitious  names 
upon  it,^^*  or  if  an  indorser  transfer  an  instrument  upon  which  the 

111  Graves  v.  American  Exch.  Bank,  17  N.  Y.  205;  Colson  v.  Arnot,  57  N. 
Y.  2.";3;  Palm  v.  Watt,  7  Hun.  317.  In  the  case  of  Caulkins  v.  Whisler.  29 
Iowa,  495,  a  pereon  wrote  his  name  on  a  blank  paper,  for  the  purpose  of 
identifying  his  signature;  and  the  one  to  whom  such  paper  was  given  wrote 
over  the  name  a  promissory  note,  which  he  negotiated  before  maturity  to  an 
innocent  holder.  It  was  held  that  "a  holder  of  negotiable  paper  acquired  be- 
fore dishonor  is  not  protected  against  defenses  that  make  void  the  Instru- 
ment. He  can  have  no  claim  upon  forged  paper  against  the  person  whose 
name  is  falsely  affixed  thereto  as  the  maker,  and  who  is  without  fault  as 
to  the  forgery  and  the  taking  of  the  paper  by  the  holder."  Mead  v.  Young, 
4  Term  R.  28. 

112  Howard  v.  Duncan,  3  Lans.  174;  Union  Bank  v.  Middlebrook,  33  Conn. 
95;  Thorn  v.  Bell,  Lalor  Supp.  430.  See,  contra,  Shisler  v.  Vaudike,  92  Pa. 
St.  449;  Brook  v.  Hook,  L.  R.  6  Exch.  89;  McKenzie  v.  British  Linen  Co., 
44  Law  T.  (N.  S.)  431 ;  Workman  v.  Wright,  33  Ohio  St.  495. 

113  The  student  must  carry  in  mind  that  this  doctrine  is  by  no  means 
settled.  There  is  authority  against  It,  which  Mr.  Daniels  has  characterized 
as  based  upon  views  of  force.     Neg.  Inst.  §§  1351,  1352,  et  seq. 

114  Hortsman  v.  llenshaw,  11  How.  177  Un  this  case  the  bill  had  upon  It 


214  DEFENSES.  [Ch.   7 

name  of  the  drawer,  maker,  acceptor,  or  of  a  prior  indorser  is  forged, 
then  each  of  these  parties  is  bound  hornnse  of  estoppel  by  virtue  of 
the  reasons  already  discussed  under  the  head  of  ''^"arranties."  ^^° 

It  often  happens,  however,  that  the  forgerj'  of  the  instrument  is 
not  detected  until  the  cash  called  for  in  it  is  paid  to  the  ostensible 
holder.  In  such  case  diverse  rights  arise.  The  party  paying  may 
recover  the  amount  paid  from  the  person  paid  on  the  ground  of  pay- 
ment under  a  mistake  of  fact.^^*  And  this  is  so  despite  any  laches 
or  negligence  which  may  be  charged  by  the  person  paid  to  the  person 
paying.^ ^^  There  are  two  exceptions  to  this  rule.  One  is  when 
this  payment  is  made  through  negligence  which  results  in  loss.^^' 
The  other  is  when  a  drawee  pays  a  bill  upon  the  forged  signature  of 
the  drawer  to  a  bona  fide  holder  for  value,  in  which  case  he  is  held  to 
a  knowledge  of  his  correspondent's  signature,^ ^^  and  therefore  unable 
to  recover  from  the  bona  fide  holder.  If  the  payment  of  paper  ne- 
gotiable only  by  indorsement  is  made  by  the  drawee  of  a  draft  in 
good  faith  under  a  forged  indorsement,  it  is,  as  to  the  true  owner 
of  the  draft,  no  payment  at  all,  because  the  forged  indorsement  does 
not  pass  title  to  commercial  paper,  and  the  true  owner  may  therefore 
recover  the  amount  of  the  draft  from  the  drawee,^ 2°  as  though  the 
draweehad  not  already  made  payment  of  it.^^^     This  rule  is  extended 

the  forged  indorsements  of  the  payee,  and  it  was  put  in  circulation  by  the 
drawers.  By  so  doing,  they  must  be  understood  as  atiirming  tliat  the  in- 
dorsement is  in  the  handwriting  of  tlie  payees,  or  written  by  tlieir  authority. 
*  *  *  The  drawers  must  be  equally  liable  to  the  acceptor  who  paid  the 
bill."  Taney,  C.  J.);  Burgess  v.  Northern  Bank,  4  Bush,  GOO;  Coggill  v. 
American  Exeh.  Bank,  1  N.  Y.  113;    Meacher  v.  Fort,  3  Hill  (S.  C.)  227. 

11 B  See,  supra,  p.  141. 

lie  Frank  v.  Lanier,  91  N.  Y.  112;  Kingston  Bank  v.  Eltinge,  40  N.  Y.  391; 
Heiser  v.  Hatch.  8G  N.  Y,  614;  Marine  Nat.  Bank  v.  National  City  Bank,  59^ 
N.  Y.  G7. 

117  Frank  v.  Lanier,  91  N.  Y.  112;  Lawrence  v.  American  Nat.  Bank,  .54  N. 
Y.  432;  Young  v.  Lehman,  03  Ala.  523;  Fraker  v.  Little,  24  Kan.  n9S;  XL 
S.  V.  National  Park  Bank,  6  Fed.  8-52. 

118  Welch  V.  Goodwin,  123  Mass.  77. 

119  Goddard  v.  Merchants'  Bank,  4  N.  Y.  147;  White  v.  Continental  Nat, 
Bank,  64  N.  Y.  316. 

120  Citizens'  Nat.  Bank  of  Davenport  v.  Importers'  &  Traders'  Bank,  119  N. 
y.  19.5,  23  N.  E.  540;    Graves  v.  American  Exch.  Bank,  17  N.  Y.  205. 

121  Bank  of  British  North  America  v.  Merchants'  Nat.  Bank,  91  N.  Y.  106, 


Ch.   7]  REAL    AND    PERSONAL    DEFENSES.  245 

to  persons  claiming  under  the  forged  indorsement  who  hare  no  title 
as  against  the  true  owners,  and  to  whom  for  the  same  reason  pay- 
ment cannot  be  lawfully  made.^-^  Such  persons  must  rely  for  their 
protection  upon  the  warranties  implied  in  the  indorsements  of  prior 
parties  and  already  explained.  Thus  the  general  rules  summarized 
are: 

(1)  That  the  payor  can  recover  of  the  payee  claiming  through  a 
forgery. 

(2)  The  forgery  does  not  destroy  the  title  of  the  true  owner  to  the 
instiniment,  nor  the  right  to  collect  it;   and 

(3)  The  sole  recourse  of  parties  claiming  under  the  forgery  is  upon 
the  warranties  of  parties  prior  to  them  and  subsequent  to  the  forgery. 

SAME  — PERSONAL    DEFENSES. 

109.  Personal  defenses  are  in  general  founded  upon  the 
agreement  or  conduct  of  a  particular  person  "with  refer- 
ence to  the  instruinent,  by  reason  of  -which  the  courts 
"will  not  enforce  the  instrument  in  favor  of  the  holder 
if  he  be  a  party  to  the  wrong,  or  of  subsequent  holders 
■who  took  the  instrument  \^ith  knowledge  of  the  first  hold- 
er's -wrongful  participation. 

110.  Common  personal  defenses  are: 

(a)  Those  "where  there  is  no  real  intention  of  the 

parties  to  issue  or  indorse  an  instrument. 

(b)  Those  where  a  defense  is  interposed  by  reason 

of  some  defect   in   the  consideration   of  the 
instrument  or  of  its  transfer. 

(c)  Those    where    the    instrument  has    been    dis- 

charged as  an  obligation. 

The  student  has  already  seen  the  reason  of  the  classification  of 
defenses  into  real  and  personal.  Real  defenses  avail  against  a  bona 
fide  holder;  personal  defenses  do  not.  Keal  defenses  avail  because 
no  contract  rights  are  created   by  the  intended  instrument,   and 

122  Canal  Bank  v.  Bank  of  Albany,  1  Hill,  287;  Talbot  v.  Bank  of  Koclies- 
ter,  1  Hill,  295;    Dick  v.  Leverich,  11  La.  573. 


246  .  DEFENSES.  [Ch.  7 

therefore  the  bona  fide  holder  can  acquire  none.  Personal  defenses 
do  not  avail  because  contracts  are  created,  which,  as  between 
immediate  parties,  are  fundamentally  lacking  in  some  element  neces- 
sary for  their  enforcement,  or  else  because  it  would  be  a  legal 
wrong  to  enforce  them  as  to  such  parties.  For  example,  bills  or 
notes  tainted  with  fraud  or  duress  in  their  issue  or  indorsement 
lack  the  vital  power  of  consent.  If  they  are  defective  in  point  of 
consideration  there  is  nothing  to  sustain  the  contract,  and  it  must 
fall  to  the  ground.  If  the  consideration  of  the  instrument  or  that 
of  its  indorsement  is  illegal,  then  to  allow  the  enforcement  of  the 
contract  in  violation  of  law  would  be  a  legal  absurdity,  and  so 
in  these  and  many  other  cases  relief,  as  between  immediate  par- 
ties, is  allowed  by  courts  to  the  person  wronged.  But  throughout 
them  the  student  will  notice  that  there  is  running  one  common 
characteristic.  They  all  are  based  upon  some  personal  act  or  omis- 
sion of  a  nature  such  that  to  enforce  it  as  between  parties  would 
be  to  enable  the  prosecuting  party  to  profit  by  his  own  fraud, 
or  take  advantage  of  his  own  wrong,  or  found  a  claim  upon  his  own 
iniquity.  Courts  will  not  lend  their  active  aid  to  one  guilty  of  such  un- 
conscientious conduct,  or  to  one  who  is  in  equal  wrong  with  the 
defendant  touching  the  transaction  as  to  which  relief  is  sought. 
By  allowing  the  defense  this  will  leave  the  parties  where  they  find 
them,  without  interfering  in  behalf  of  either.  The  maxim  is  that 
'Tie  who  comes  into  equity  must  come  with  clean  hands,'-'  and  the 
courts,  as  between  immediate  parties,  will  not  enforce  the  con- 
tract in  favor  of  one  who  is  not  justly  and  legally  entitled  to  its 
enforcement.  But  this  principle  does  not  apply  to  the  bona  fide 
holder  who  is  not  a  party  to  the  transaction.  He  has  committed 
no  wrong.  He  knows  of  no  wrong.  He  has  paid  value  for  the  in- 
strument, and  purchased  what  he  supposed  was  a  good  legal  title 
to  enforce  all  the  rights  it  contained  or  evidenced.  Therefore,  so 
far  as  the  act  of  any  third  party  is  concerned,  both  he  and  the 
party  complaining  of  the  wrong  are  equally  innocent.  But  the 
bona  fide  holder  has  the  superior  equity,  in  that  he  has  the  legal 
title  to  the  instrument,  and  for  the  further  reason  that  of  two 
innocent  parties — the  party  wronged  and  the  bona  fide  holder — 
he  whose  act  or  omission  has  caused  the  loss  must  bear  it.  There- 
fore, as  between  these  two  innocent  parties,  a  defense  caused  by  the 


Ch.  7]  REAL  AND  PERSONAL  DEFENSES.  247 

act,  omission,  conduct,  or  agreement  of  the  wronged  person  with 
reference  to  the  instrument  is  not  allowed  to  the  wronged  person 
against  the  bona  fide  holder.  And  thus,  in  dealing  with  defenses 
to  actions  upon  bills  and  notes  in  the  hands  of  bona  fide  holders, 
the  first  question  for  the  student  to  ask  himself  is  whether  the  de- 
fense is  real  and  valid,  or  personal  and  not  available. 

111.  FRAUD  AND  DURESS.— The  common  personal  de- 
fenses, -where  there  is  no  real  intention  of  the  parties  to 
issue  or  indorse  an  instrument,  are  fraud  and  duress. 

It  is  very  difficult  to  furnish  the  student  with  any  clear  and 
certain  tests  to  determine  in  all  cases  the  meaning  of  the  defense 
of  fraud  in  the  inception,  making,  or  transfer  of  a  negotiable  in- 
strument. The  principal  reason  why  fraud  is  such  a  defense  is  that 
it  destroys  the  effect  of  the  contract  as  a  legal  obligation,  because, 
with  the  party  defrauded,  there  is  no  full  consent  to  be  bound  by 
the  obligation  which  the  contract  purports  to  create.  But  the  acts, 
omissions,  concealments,  or  conduct  which  go  to  make  up  the  legal 
conception  of  fraud,  are  in  their  nature  so  multiform  that  to  cover 
their  many  phases  by  a  set  of  concise  definitions  is  well-nigh  im- 
possible. .  Mr.  Pomeroy  says  of  fraud  generally  that  it  includes 
"all  willful  or  intentional  acts,  omissions,  or  concealments  which 
involve  a  breach  of  either  legal  or  equitable  duty,  trust  or  con- 
fidence, and  are  injurious  to  another,  by  which  an  undue  or  uncon- 
scientious advantage  over  another  is  obtained."  ^^^  Sir  William  An- 
son declares  the  test  in  determining  fraud  to  be  whether  under  the 
circumstances  an  action  for  deceit  against  the  party  committing 
the  fraud  will  lie,  and  speaks  of  a  fraud  "as  a  false  representation 
of  fact,  made  with  a  knowledge  of  its  falsehood,  or  in  reckless  dis- 
regard whether  it  be  true  or  false,  with  the  intention  that  it  should 
be  acted  upon  by  the  complaining  party,  and  actually  inducing  him 
to  act  upon  it."  ^^*  And  the  text  writers  upon  Contracts  general- 
ly,^ ■^^  treating  it  as  a  matter  of  misrepresentation,  which  it  usually 

12  3  Pom.  Eq.  Jur.  §  873. 

124  Anson,  Cont.  pp.  153,  154. 

125  Chit.  Cont.  p.  750  et  seq.;  Pol.  Cont.  p.  512  et  seq.;  2  Pars.  Cont.  7G9  et 
seq.;   Lawson,  Cont.  §  22G  et  seq.;    Clark,  Cont.  p.  324  et  seq. 


248  DEFENSES.  [Ch.  7 

is,  analyze  fraud  along  the  lines  of  Sir  William  Anson's  definition, 
and,  resolving  it  into  the  constituent  elements,  say  that  there  must 
be  (1)  false  representation  of  a  past  or  existing  material  fact,  (2) 
such  that  the  other  party  has  a  right  to  rely  upon  it,  (3)  made 
with  either  knowledge  of  its  falsity,  or  with  reckless  disregard 
whether  it  be  true  or  false,  (4)  intended  to  be  brought  to  the  knowl- 
edge of  the  other  party,  (5)  and  that  it  must  deceive  the  other  party, 
and  (6)  result  in  injury  to  him.^-*  Suffice  it  to  say,  with  regard 
to  these  general  statements,  that  they  often  furnish  the  test  in  de- 
termining fraud  in  the  case  of  the  giving  of  negotiable  mf?trnmonta 
as  well  as  of  their  indorsements.  Their  meaning  and  practical 
application,  however,  are  so  fully  discussed  in  elementary  works  on 
Contracts  that  it  is  unwise  to  give  further  space  to  the  question 
here.^^^ 

With  negotiable  instruments  the  question  that  principally  con- 
cerns us  is  the  position  of  the  bona  fide  holder.  It  is  safe  to  say  that 
proven  fraud  is  a  defense  between  immediate  parties,  but  it  is  a 
personal  defense  only,  and  not  in  general  available  against  the  pur- 
chaser of  the  instrument  for  value  without  notice.  *'The  law,"  says 
Chief  Justice  Kent,  "has  always  had  a  regard  to  derivative  titles, 
though  it  may  be  true  as  an  abstract  principle  that  a  derivative  title 
cannot  be  better  than  that  from  which  it  is  derived."  ^^^  And  therefore 

126  Clark.  Cont.  p.  324. 

127  Civ.  Code  N.  Y.  1879,  §§  757,  7.58.  The  proposed  New  York  Civil  Code 
classified  and  defined  fraud  thus:  "Actual  fraud  consists  in  any  of  the  fol- 
lowing acts  committed  by  a  party  to  the  contract,  or  with  his  connivance, 
with  intent  to  deceive  another  party  thereto,  or  to  induce  liira  to  enter  into 
the  contract.  Its  elements  are  (1)  the  suggestion  as  a  fact  of  that  which  is  not 
true  by  one  who  does  not  believe  it  to  be  trae;  (2)  the  positive  assertion  in  a 
manner  not  warranted  by  the  information  of  the  person  making  it  of  that 
which  is  not  trae,  though  he  believes  it  to  be  true;  (3)  the  suppression  of 
that  which  is  true  by  one  having  knowledge  or  belief  of  the  fact;  (4)  a 
promise  made  without  any  intention  of  performing  it;  (5)  any  other  act  fitted 
to  deceive.  Constructive  fraud  consists  (1)  in  any  breach  of  duty  which, 
without  an  actually  fraudulent  intent,  gives  an  advantage  to  the  person  in 
fault,  or  any  one  claiming  under  him,  by  misleading  another  to  his  prejudice, 
or  to  the  prejudice  of  any  one  claiming  under  him;  (2)  in  any  such  act  or 
omission  as  the  law  specially  declares  to  be  fraudulent,  without  respect  to 
actual  fraud." 

128  Jackson  v.  Henry,  10  Johns.  184. 


Ch.  7]  REAL  AND  PERSONAL  DEFENSES.  249 

it  is  that  rights  derived  from  the  ostensible  possessor,  taken  without 
any  knowledge  or  notice  of  his  fraudulent  possession,  and  received  for 
value  given,  will  not  be  disturbed  by  the  courts.^^®  From  this  general 
principle  is  developed  the  settled  rule  that,  it  once  being  established 
as  a  fact  that  the  holder  of  a  negotiable  instrument  is  a  purchaser  for 
value  without  knowledge  or  notice  of  fraud,  he  may  recover  upon 
the  instrument  against  any  prior  defrauded  party  who  is  not  im- 
mediate.^^" For  with  negotiable  instruments  the  equitable  rule 
prevails  that  if  a  third  person,  not  knowing  of  the  fraud,  and  not  being 
put  upon  his  inquiry,  buys  the  instrument  for  a  valuable  consideration 
from  one  who  has  obtained  it  through  fraud,  the  defeasible  title  of 
the  vendor  will  be  made  indefeasible  in  the  hands  of  the  vendee,  and 
he  may  hold  and  enforce  the  instrument.  As  between  the  defraud- 
ed party  and  the  bona  fide  purchaser,  both  of  whom  are  innocent, 
the  law  will  cast  the  loss  on  him  whose  act,  omission,  or  conduct 
enabled  the  defrauder  to  transmit  them  to  an  innocent  purchaser.^ ^^ 
Another  reason  arises  out  of  the  technical  relief  granted  in  cases  of 
fraud.  The  party  wronged  by  a  fraud  in  case  of  a  contract  may  at 
his  election  afQrm  it,  and  take  from  it  what  benefit  he  can, — or  he 
may  rescind  it,  and  treat  the  contract  as  though  it  had  never  been 
made.  The  operation  of  this  rule  presupposes  that  the  contract 
was  until  rescission  a  binding  obligation,  and,  in  case  of  its  affirma- 
tion, that  it  continues  so.  As  the  law  phrases  it,  the  contract  affect- 
ed by  fraud  is  voidable,  but  not  void.  Manifestly,  this  right  of  re- 
scission should  not  be  extended  in  its  operation  against  the  bona  fide 
holder.  If  it  is  to  be  exercised,  it  should  be  only  exercised  as  long 
as  the  parties  stand  in  their  original  relation,  and  before  the  rights 
of  third  parties  intervened.     If  the  party  who  had  the  right  of  re- 

120  Valentine  v.  Lunt,  115  N.  Y.  496,  22  N.  E.  209;  Simpson  v.  Del  Hoyo,  94 
N.  Y.  189. 

130  Yosburgh  v.  Diefendorf,  119  N.  Y.  357,  23  N.  E.  801;  Justh  v.  National 
Bank  of  the  Commonwealth,  56  N.  Y.  478;  First  Nat.  Bank  of  Cortland  v. 
Green,  43  N.  Y.  298;  Farmers'  &  C.  Bank  v.  Noxon,  45  N.  Y.  762;  Ocean 
Nat.  Bank  v.  Carll,  55  N.  Y.  440;  Grocers'  Bank  v.  Penfield,  69  N.  Y.  502; 
Nickerson  v.  Ruger,  76  N.  Y.  279;  Stewart  v.  Lansing,  104  U.  S.  505;  Smith 
V.  Livingston,  111  Mass.  342;   Sullivan  v.  Langley,  120  INIass.  437. 

131  Southwick  V.  First  Nat.  Bank  of  Memphis,  84  N.  Y.  420;  Gridley  v. 
Bane,  57  111.  529;   Ormsbee  v.  Howe.  54  Vt.  182. 


260  DEFENSES.  [Ch.  7 

scission  failed  to  assert  it,  the  innocent  purchaser  for  value  should 
not  suffer. 

This  general  principle  and  the  reasons  for  it  rest  upon  the  equities 
of  the  case.  And  so  general  is  fraud  in  its  nature  that  it  cannot  be 
always  said  that  the  equities  rest  with  the  bona  fide  holder.  Some- 
times they  preponderate  with  the  party  defrauded,  in  which  case  the 
general  principle  does  not  apph'.  Sometimes  they  are  so  even  that 
the  current  of  decisions  is  divided  in  favor  of  the  party  defrauded 
and  of  the  bona  fide  holder.  In  all  these  doubtful  cases  the  court* 
generally  lay  the  burden  of  the  loss  upon  him  through  whose  act  it 
was  caused.  A  question  very  commonly  involved  in  them  is  one  of 
delivery,  the  phase  of  delivery  being  either  (1)  a  delivery,  through 
fraud,  of  a  completed  instrument,  (2)  or  of  an  incomplete  one,  or  (3)  a 
delivery  through  the  fraud  or  violation  of  the  trust  reposed  in  or 
of  the  instructions  given  to  an  agent  or  to  a  third  party,  or  (4)  a  de- 
livery through  mistake  or  fraudulent  misrepresentation  as  to  the 
character  of  the  instrument  intended  to  be  issued.^ ^^  In  the  case 
of  an  instrument  complete  in  foiin,  but  delivered  through  fraud,  as, 
for  example,  a  stolen  note,  the  equities  to  be  weighed  are  whether 
nondelivery,  which  renders  the  instrument  inoperative,^^^  should 
prevail  against  the  rights  of  a  bona  fide  holder  into  whose  hands 
it  comes.  On  the  one  hand  it  is  urged  that  the  instrument  never 
had  an  inception,  so  as  to  enable  any  person  to  become  the  bona  fide 
holder.  It  is  an  imperfect  instrument,  like  a  blank  piece  of  paper^ 
wanting,  to  give  it  vitality,  the  delivery  of  the  person  bound,  and  in- 
tention on  his  part  to  contract.^  ^*  On  the  other  hand,  it  is  urged, 
with  what  seems  the  better  reason,  that  if  such  person  had  not  ulti- 
mately intended  to  be  bound,  he  would  not  have  signed  the  in- 
strument, and  that  his  leaving  a  signed  instrument  whence  it  could 
be  taken  and  set  into  circulation,  was  an  act  for  which  he,  and  not  the 
bona  fide  holder,  should  suffer.  The  fraudulent  possessor  of  the  com- 
pleted instrument  had  presumptively  the  right  to  transfer  it, — and, 
under  the  law  merchant,  the  purchaser  for  value  of  a  completed  in- 
strument was  not  bound  to  inquire  into  its  origin  from  the  fraudu- 

132  The  classification  Iiere  adopted  is  that  of  Mr.  Daniel  on  Negotiable  In- 
struments (chapter  26). 

133  See  supra,  p.  g9. 

134  Hall  V.  Wilson,  IG  Barb.  548;   Burson  v.  Huntington,  21  Mich.  415. 


Ch.    7]  REAL    AND    PERSONAL    DEFENSES.  251 

lent  possessor;  and  these  two  facts  determine  the  equity  of  the 
bona  fide  holder  to  be  superior  to  that  of  the  defrauded  person  from 
whom  it  was  stolen/'"  Where  the  instrument  is  not  complete,  the 
reasons  we  have  just  given  do  not  apply.  As  long  as  it  was  incom- 
plete, the  party  cannot  be  presumed  to  have  intended  either  to  be 
bound  by  it,  or  to  have  put  it  in  circulation,  or  even  to  have  made 
a  contract  at  all.  And  to  allow  some  one  else  who  has  stolen  it  or 
become  fraudulently  possessed  of  it  to  complete  the  instrument,  and 
to  put  it  as  a  binding  contract  into  the  hands  of  a  bona  fide  holder, 
would  be  to  allow  a  third  person  to  make  a  binding  contract  for  an- 
other through  fraud  and  without  authority.  In  such  cases,  where 
the  equities  of  the  defrauded  party  and  the  bona  fide  holder  are 
equal,  the  law  that  none  but  parties  or  their  authorized  agents  can 
make  binding  contracts  must  prevail.^^®  But  this  last  reason  does 
not  apply  where  such  person  has  parted  with  the  possession,  lea\ang 
blanks  unfilled.  Such  a  parting  with  possession  may  naturally  be  sup- 
posed to  mean  that  he  intended  to  allow  the  person  to  whom  he  gave 
the  instrument  to  fill  in  the  blank  in  the  instrument.  And  a  bona  fide 
holder  may  be  warranted  in  supposing  that  it  was  taken  with  thia 
permission,  and  without  wrong  fill  them  in  himself.^'^     Therefore 

13 B  Gould  V.  Segee,  5  Duer,  260;  Marston  v.  Allen,  8  Mees.  &  W.  494;  Ship- 
ley V.  Carroll,  45  111.  2S5;   Clarke  v.  Johnson,  54  111.  296. 

136  Ledwich  v.  McKim,  53  N.  Y.  307;  Baxendale  v.  Bennett,  3  Q.  B.  Div. 
525.  In  this  case  it  appeared  that  the  defendant  gave  H.  his  acceptance  on 
a  stamped  paper,  and  authorized  H.  to  fill  in  his  name  as  drawer.  H.  returned 
the  blank  acceptance  to  the  defendant  in  the  same  state  as  he  received  it.  The 
defendant  placed  it  in  his  desk,  from  which  it  was  lost  or  stolen.  0.  after- 
wards filled  in  his  own  name  without  the  defendant's  authority,  and  the  plain- 
tiff brought  his  action  on  it  as  an  indorsee  for  value.  The  defendant  was  held 
not  liable,  on  the  ground  that  after  the  return  of  the  blank  acceptance  by  H. 
the  defendant  had  never  authorized  any  one  to  fill  in  a  drawer's  name,  and 
that  he  had  never  issued  the  acceptance  intending  it  to  be  used. 

187  Redlich  V.  Doll,  54  N.  Y.  234;  Mitchell  v.  Culver,  7  Cow.  336;  Page  v. 
Morrell,  *42  N.  Y.  117;  Garrard  v.  Haddan,  67  Pa.  St.  82;  Young  v.  Grote, 
4  Bing.  253;  Kitchen  v.  Place,  41  Barb.  465;  Douglass  v.  Matting,  29  Iowa, 
498;  McDonald  v.  Muscatine  Nat.  Bank,  27  Iowa,  319;  Harris  v.  Berger,  15 
N.  Y.  St.  Rep.  389;  Town  of  Solon  v.  Williamsburgh  Sav.  Bank,  114  N.  Y. 
122,  at  page  136,  21  N.  E.  168;  Davis  Sewing  Mach.  Co.  v.  Best,  105  N.  Y. 
59,  11  N.  E.  146. 


252  DEFENSES.  [Ch.  7 

the  equities  return  again  to  the  side  of  the  bona  fide  holder,  and 
he  may  enforce  the  note  against  the  defrauded  party. 

In  case  of  delivery  through  fraud  or  %aolation  of  the  trust  reposed 
in,  or  of  the  instructions  given  to,  an  agent  or  to  a  third  party  who 
holds  the  instrument,  the  cases  are  of  two  classes.  The  person  hold- 
ing the  bill  or  note  may  be  either  an  agent,  or  merely  its  custodian. 
In  case  of  agency,  the  principal  has  parted  wdth  the  paper  with  the 
intention  of  disposing  of  it,  though  in  its  disposition  the  agent  has 
committed  a  fraud,  breach  of  trust,  or  acted  in  violation  of  his  prin- 
cipal's instructions.  In  case  of  paper  held  by  a  custodian,  there  is 
no  intention  of  the  person  sought  to  be  charged  to  part  with  the 
paper  until  some  event  or  contingency  has  happened,  in  which  case 
the  holder  is  empowered  and  becomes  an  agent  to  deliver.  In  both 
of  these  classes  the  balance  of  equities  is,  on  the  one  hand,  between 
the  undoubted  legal  proposition  that  no  man  can  be  divested  of  his 
own  property  without  his  own  consent,  and  that  consequently  even 
the  honest  purchaser  of  personal  property  cannot  hold  against  the 
true  proprietor,  and,  on  the  other  hand,  the  fact  that  the  party 
sought  to  be  charged  and  the  bona  fide  purchaser  are  equally  inno- 
cent of  wrong,  and  one  of  them  must  suffer  a  loss.  The  adjustment 
of  these  conflicting  equities  turns  upon  the  point  that  the  party 
sought  to  be  charged  has  by  his  voluntary  act  conferred  upon  the 
agent  or  custodian  through  whom  the  bona  fide  purchaser  derives 
his  title  either  the  apparent  right  of  property,  as  owner,  or  of  dis- 
posal, as  agent,  or  else  has  clothed  him  with  such  evidence  of  the 
right  to  transfer  as  to  imply  authority  of  disposal.  And  a  rule, 
whose  justice  cannot  be  disputed,  is  laid  down,  that  where  one  of 
two  innocent  parties  must  suffer  by  the  fraud  or  wrong  of  a  third 
person,  the  one  who  put  it  in  the  power  of  such  third  person  to  com- 
mit such  fraud  or  wrong  must  bear  the  loss.^^® 

The  fourth  and  last  class  of  cases  is  that  of  instruments  delivered 
through  mistake  or  fraudulent  misrepresentation  as  to  the  charac- 
ter of  the  instrument  to  be  issued.  An  elementary  example  illus- 
trating the  principle  involved,  though  not  exactly  covered  by  the 

138  Redlich  v.  Doll,  54  N.  Y.  234;  Saltus  v.  Everett,  20  Wend.  267;  Vallett 
V.  rarker,  6  Wend.  615;  Smith  v.  Moberly,  10  B.  Mon.  269;  Passumpsic  Bank 
V.  Goss,  31  Vt.  315;   Bonner  v.  Nelson,  57  Ga.  433. 


Ch.   7J  REAL    AND    PERSONAL    DEFENSES.  25S 

statement  of  the  rule,  is  where  a  negotiable  instrument  is  written 
over  a  signature  put,  without  any  intention  of  entering  into  a  con- 
tract, upon  a  blank  piece  of  paper.  This  is  clearly  a  forgery,  and  so 
for  that  reason  alone  the  bona  fide  holder  cannot  hold  the  maker  or 
acceptor.  But  weighing  the  equities  of  the  maker  or  acceptor  with 
those  of  the  bona  fide  holder,  this  case  is  to  be  distinguished  in  prin- 
ciple from  those  last  stated.  The  maker  or  acceptor,  by  his  own 
act,  has  not  put  it  in  the  power  of  another  to  perpetrate  the  fraud. 
No  fault  can  be  imputed  to  them.  They  did  not  intrust  their  signa- 
ture to  the  possession  of  another  for  the  purpose  of  making  a  binding 
contract.  And  tlierefore  the  maker  or  acceptor  stands  side  by  side 
with  the  bona  fide  holder,  each  equally  innocent,  but  with  the  bona 
fide  holder  holding  his  right  through  the  crime  of  a  third  person, 
and  so  holding  a  lower  grade  of  right  than  that  of  the  maker  or  ac- 
ceptor.^ ^®  From  this  elementary  case  a  theory  is  easily  developed 
to  apply  to  cases  of  bills  or  notes  procured  from  aged,  infirm,  or 
illiterate  persons,  and  from  them  to  cases  of  persons  executing  in- 
struments under  mistake  and  misrepresentation,  which  are  governed 
by  the  same  principle.  With  them  all  there  is  no  intention  to  put 
a  negotiable  instrument  into  circulation.  The  aged,  infirm,  or  illit- 
erate person,  like  a  blind  man,  does  not  know  what  he  signs.^***  He 
no  more  enters  into  a  contract  than  he  who  puts  his  signature  on  a 
blank  piece  of  paper.  And  for  a  like  reason,  if  a  person  can  be 
ascertained  to  have  issued  without  negligence  a  negotiable  instru- 
ment, being  led  by  fraud  or  mistake  to  think  he  was  signing  some 
document  other  than  a  bill  of  exchange  or  promissory  note,  the  same 
reason  in  theory  would  apply,  and  he  would  be  exempt  from  liability. 
But  this  last  statement  of  the  rule  is  rather  one  of  consistent  theory 
than  of  usual  occurrence.  A  case  can  hardly  be  supposed  to  which 
the  rule  would  not  apply  that  a  person  capable  of  consent  and  of 
understanding  the  contents  of  a  document  should  be.  bound  to 
know  the  character  of  the  negotiable  instrument  he  signs.  If  the 
person  capable  of  consent  and  understanding,  signs  commercial 
paper  without  an  understanding  of  its  character,  it  is  negligence  on 

139  Caulkins  v.  Whisler,  29  Iowa,  495;    Nance  v.  Lary,  5  Ala.  370. 

140  Putnam  v.  Sullivan,  4  Mass.  45;    Foster  v.  Mackinnon,  L.  R.  4  C.  P. 
704;    National  Exch.  Bank  v.  Veneman,  43  Hun,  241. 


254  DEFENSES.  [Ch.  7 

his  part  And  for  this  reason,  iu  contrasting  his  rights  with  those 
of  the  innocent  purchaser  for  value,  the  scale  of  equities  generally 
turns  in  favor  of  the  latter.  Hence  the  majority  of  the  decisions 
lay  down  the  rule  that  the  failure  of  the  maker  or  acceptor  to  use  all 
means  to  ascertain  the  nature  and  character  of  the  instrument  he 
signed,  is  negligence  which  makes  him  liable  to  the  bona  fide 
holder.^" 
Duress  and  Undue  Influence. 

Although  there  is  a  wide  variance  in  the  decisions  and  authorities 
upon  the  subject,  it  would  seem  that  this  principle  would  also  apply 
to  negotiable  instruments  infected  with  duress.  Duress,  as  applied 
to  bills  and  notes,  consists  in  actaal  or  threatened  violence  or  im- 
prisonment. The  subject  of  it  must  be  the  contracting  party  him- 
self, or  his  wife,  parent,  or  child.  It  must  be  inflicted  or  threatened 
by  the  other  party,  or  else  by  one  acting  with  his  knowledge  and  for 
his  advantage. ^■'^ 

The  doctrine  of  some  of  the  authorities  is  that  a  bona  fide  pur- 
chaser for  value  does  not  acquire  a  good  title  to  paper  which  he  has 
bought  from  one  who  has  procured  it  by  undue  influence,  compul- 
sion, or  coercion.  They  distinguish  duress  from  fraud  in  that  in 
case  of  fraud  there  is  a  voluntary  parting  with  the  possession  of 
the  property,  and  an  uncontrolled  volition  to  pass  the  title.  But  in 
case  of  duress,  where  there  exists  coercion,  threats,  compulsion,  or 
undue  influence,  there  is  no  such  volition.  There  is  no  intention 
nor  purpose  but  to  yield  to  moral  pressure  for  relief  from  it,  and 
therefore  it  is  maintained  that  a  case  is  thus  presented  more  analo- 
gous to  a  parting  with  property  by  robbery,  and  that  no  title  can 
be  made  through  a  possession  thus  acquired.^^^      But  in  criticism 

1*1  Chapman  v.  Rose,  56  N.  Y.  137;  National  Exch.  Bank  v.  Veneman,  43 
Hun,  241;  Douglass  v.  Matting,  29  Iowa,  498;  Snirts  v.  Overjohn,  60  Mo. 
315;  Ort  V.  Fowler,  31  Kan.  478,  2  Pac.  580.  But  see,  contra,  Hubbard  v. 
Rankin,  71  111.  129,  governed  by  statute;  Gibbs  v.  Linabury,  22  Mich.  492; 
Gline  v.  Guthrie,  42  Ind.  227, 

142  Anson,  Cont.  p.   164. 

143  Barry  v.  Equitable  Life  Assur.  Soc,  59  N.  Y.  587;  Loomis  v.  Ruck,  56 
N.  Y.  462;  Huguenim  v.  Baseley,  14  Ves.  273,  3  Lead.  Gas.  Eq.  94,  463;  Eadie 
V.  Slimmon,  26  N.  Y.  9;  Gardner  v.  Gardner,  34  N.  Y.  155;  Voorhees  v. 
Voorhees,  39  N.  Y.  463;  Tyler  v.  Gardiner,  35  N.  Y.  559;  Kinne  v.  Johnson, 
GO  Barb.  69;    Ferris  v.  Brush,  1  Edw.  Ch.  572;   Fry  v.  Fiy,  7  Paige,  461. 


Ch.  7]  REAL   AND    PERSONAL   DEFENSES.  255 

of  the  authorities  cited  it  may  be  said  that,  so  far  as  they  relate  to 
negotiable  paper,  they  do  not  bear  out  what  is  claimed  for  them  by 
the  text  writers.^**  Loomis  v.  Ruck  and  Barry  v.  Equitable  Life 
Assurance  Society  are  illustrations.  In  Loomis  v.  Euck  the  signa- 
ture of  a  married  woman  was  given  under  duress  to  a  note  for  the 
sole  benefit  of  her  husband,  to  the  plaintiff,  who,  at  the  time  of  the 
duress,  was  present.  It  is  true  that  the  statement  of  the  New  York 
court  of  appeals  was  that  a  bona  fide  holder  cannot  enforce  a  note 
against  the  maker  which  was  given  by  him  under  duress,  but  this 
statement  is,  in  fact,  obiter  dictum,  because  the  plaintiff  in  the  case 
was  not  a  bona  fide  holder.  Neither  does  the  case  of  Barry  v.  Equita- 
ble Life  Assurance  Society  affect  the  position,  because  that  relates 
to  the  assignment  of  a  life  insurance  policy,  which  is  a  mere  chose 
in  action,  to  which  the  doctrines  of  negotiability  do  not  attach. 
And  it  would  seem  that,  in  balancing  the  equities  of  the  bona  fide 
holder  with  those  of  the  person  who  has  suffered  duress,  the  duty 
of  extreme  diligence  should  rest  upon  the  latter.^*"  It  seems  to 
be  the  opinion  that  instruments  executed  under  duress  are  voida- 
ble, and  not  void.^*^  And  it  would  therefore  be  sound  business 
policy  to  hold  that  if  the  party  suffering  duress  has  his  election  to 
aflSi*m  or  rescind  he  should,  upon  being  relieved  of  the  duress,  at 
once  exercise  his  option  to  rescind  and  recover  possession  of  the  in- 
strument itself.  If  he  failed  to  do  this  it  would  be  negligence  on 
his  part  which  would  throw  the  equities  to  the  side  of  the  bona  fide 
holder  and  protect  him  in  his  title  to  the  instrument.^*'  But  if, 
on  the  other  hand,  recovery  of  possession  of  the  instrument  is  im- 
possible, and  no  fault  or  negligence  can  be  imputed  to  the  person 
suffering  duress,  then  it  must  be  conceded  that  his  case  is  that  of 

144  Daniel,  Neg.  Inst.  §§  857,  858;   Tied.  Com.  Paper,  §  287. 
140  First  Nat.  Bank  v.  Green,  43  N.  Y.  298. 

146  Hogan  V.  Moore,  48  Ga.  156;  Ormes  v.  Beadel,  2  De  Gex,  F.  &  J.  333. 
In  Duncan  v.  Scott,  1  Camp.  100,  it  was  held  that,  where  the  defendant  was 
not  a  free  agent  when  he  drew  the  bill,  it  was  the  duty  of  the  plaintiff  to  pro- 
duce evidence  of  consideration.  In  the  case  of  Clark  v.  Pease,  41  N.  H.  414, 
it  was  held  that,  where  duress  is  shown  in  the  making  or  in  the  circulation 
of  the  note,  there  is  imposed  upon  the  plaintiff  the  burden  of  showing  that 
he  is  a  bona  fide  holder  for  value. 

147  Veach  v.  Thompson,  15  Iowa,  380;  Clark  v.  Pease,  supra;  Rogers  r. 
Adams,  ee  Ala,  GOO. 


256  DEFENSES.  [Ch.  7 

a  person  sought  to  be  charged  upon  an  obligation  which  he  never 
entered  upon,  and  that  the  bona  fide  holder  has  no  superior  equity 
to  support  his  position,  and  that  in  reason  and  in  justice  he  ought  not 
to  recover  against  a  person  whose  obligation  had  its  inception  in 
facts  which  almost  constitute  a  crime. 

112.  CONSIDERATION.— Consideration  is  the  legal  rea- 
son for  a  contract  being  binding. 

113.  Any  consideration  -wliicli  will  support  a  simple  con- 
tract is  sufB.cient  to  support  a  negotiable  bill  or  note,  or 
the  transfer  or  indorsement  thereof. 

In  case  of  negotiable  instruments  consideration  is  pre- 
sumed, but  this  presumption  may  be  rebutted. 

Text  writers  in  their  definitions  of  "consideration"  unite  in  quot- 
ing that  given  by  the  exchequer  chamber.^*^  "A  valuable  consid- 
eration in  the  sense  of  law  may  consist  either  in  some  right,  inter- 
est, profit,  or  benefit  accruing  to  the  one  party,  or  some  forbearance, 
detriment,  loss  or  responsibility  given,  suffered  or  undertaken  by 
the  other."  ^**  And  this  declaration  of  Lush,  J.,  is  perhaps  the  best 
categorical  statement  of  the  subject  yet  made.  But  it  does  not  ex- 
plain the  part  that  consideration  plays  in  the  general  theory  of 
contract.  And  therefore  we  purpose  to  explain  briefiy  the  mean- 
ing of  consideration  and  what  its  necessary  elements  are,  and  then 
show  its  application  to  the  theory  of  bills  and  notes. 

Consideration  is  the  accepted  evidence  of  the  fact  that  the  parties 
to  a  contract  intend  to  enter  into  a  binding  legal  obligation.  In 
examining  all  contracts  the  courts  first  ask  themselves  whether  there 
was  a  mutually  communicated  intention  common  between  the  par- 
ties to  act  or  forbear  towards  one  another,  and  if  they  find  there 
was,  then  they  ask  whether  the  agreement  made  between  the  par- 
ties was  such  that  it  must  be  enforced.  And  the  other  terms,  ele- 
ments and  conditions  of  the  agreement  being  according  to  law,  the 
test  whether  it  is  a  binding  legal  obligation  and  one  to  be  enforced 
turns  upon  the  question  whether  or  not  there  was  present  a  legal 

i<8  Currie  v.  Misa,  L.  R.  10  Exch.  153. 

149  Com.  Dig.  "Action  on  the  Case,"  bk.  1.  p.  15. 


Ch.   7]  REAL    AND    PERSONAL    DEFENSES.  257 

consideration.  The  consideration,  in  law,  therefore,  is  the  reason 
for  making  the  contract.  If  it  is  present  the  courts  assume  that 
the  parties  intended  to  enter  into  a  legal  obligation;  if  absent,  then, 
although  there  may  have  been  a  promise  or  meeting  of  the  minds, 
yet  there  is  no  legal  reason  why  this  promise  should  not  be  re- 
tracted or  this  consensus  revoked,  because  neither  party  has  lost 
or  gained  anything  of  substantial  value.  The  agreement  is  too 
frivolous  for  courts  to  consider,  and  is  said  to  be  "nudum  pactum  ex 
quo  non  oritur  actio." 

The  first  element  of  a  consideration  is  that  it  must  have  value. 
According  to  Sir  William  Anson,^^°  the  matter  of  a  legal  obliga- 
tion must  possess  or  must  be  reducible  to  a  pecuniary  value.  This 
merely  means  that  there  must  be  some  ascertainable  quid  pro  quo. 
Mr.  Langdell,  in  his  summary  of  the  law  of  contracts,  shows  the 
evolution  of  the  theory  of  consideration  from  the  exact  quid  pro 
quo  necessary  to  create  a  debt  to  the  varieties  of  consideration 
stated  in  the  definition  of  Lush,  J.,  which  are  sufflcient  to  support 
an  assumpsit.  There  it  appears  that  the  doctrine  of  consideration 
originated  in  the  action  of  debt,  which  originally  was  an  action  to 
recover  an  exact  sum  of  money  loaned  belonging  to  the  creditor, 
but  in  fact  in  the  possession  of  the  debtor.  The  right  was  in  the 
creditor  to  recover  of  the  debtor  the  possession  of  his  money  which 
the  debtor  thus  held.  From  these  rudimentary  notions  the  idea 
of  consideration  as  a  basis  of  the  action  of  debt  was  developed 
through  various  stages  until  it  reached  the  point  that  the  consider- 
ation of  contracts  of  debt  required  (1)  that  the  consideration  given 
or  done  should  be  given  or  done  to  the  obligor  directly,  (2)  and  for 
him  directly;  (3)  that  it  should  be  received  by  the  obligor  as  the 
full  equivalent  for  the  obligation  assumed,  and  (4)  be  actually  exe- 
cuted. But  at  all  times  the  contract  which  was  the  basis  of  debt 
required  that  there  be  an  exact  quid  pro  quo  between  its  parties. 
And  in  case  of  debt,  unless  all  these  elements  of  consideration  were 
present,  the  creditor  or  obligee  could  not  have  his  remedy  in  an 
action  of  debt,  because  all  of  these  considerations  were  of  the  essence 
of  debt.  By  the  statute  of  Edw.  I.,^®^  the  action  of  assumpsit  was 
created  to  reach  that  large  class  of  cases  which  were  not  debts,  but 

160  Anson,  Cont.  pp.  6,  7;    Poll.  Cont.  p.  3.  lei  13  Edw.  I.  c.  24. 

KEG.  RILLS 17 


258  DEFENSES.  [Ch.  7 

yet  were  analogous  to  them.  These  were  seen  to  be  a  class  of 
rights  which  were  evidently  rights  based  upon  some  sort  of  an  agree- 
ment, which,  however,  was  not  in  its  turn  based  upon  a  considera- 
tion complying  with  all  the  requisites  we  have  stated.  The  con- 
tract had  not  a  consideration  sufficient  for  it  to  support  an  action 
of  debt.  By  the  later  rules  the  agreements  for  which  assumpsit 
lay  need  not  have  an  exact  quid  pro  quo,  but  there  was,  neverthe- 
less, required  some  exchange  of  values  in  it  for  the  agreement  to  be 
binding  in  law,  or  so  that  it  could  be  enforced  by  courts  in  assumpsit. 
Hence  the  doctrine  of  consideration  sufficient  to  support  an 
assumpsit  was  develoi>ed  into  its  present  stage,  its  necessary 
elements  being  those  stated  in  the  definition  of  Lush,  J.,  we 
have  given.  And  thus  we  find  that  the  courts  have  held  a  sufficient 
consideration  to  be  a  cross  acceptance,^"^  or  the  forbearance  of  the 
debt  of  a  third  person,^ °^  or  the  compromise  of  a  disputed  liabil- 
ity,^''* or  a  promise  to  give  up  a  bill  thought  to  be  invalid,^""  or  a 
debt  barred  by  the  statute  of  limitations,^^®  or  a  debt  discharged  in 
banki'uptcy.^^^  The  courts,  on  the  other  hand,  have  held  insufficient 
considerations  to  be  a  mere  moral  obligation,^ "**  or  a  debt  represent- 
ed to  be  due,  though  not  really  due,^^®  or  the  giving  up  a  void' note, ^^^ 
or  a  voluntary  gift  of  money.^®^  And  that  the  distinction  between 
these  cases  rests  upon  whether  the  different  considerations  are  or 
are  not  of  any  actual  value. 

If  there  is  actual  value  it  will  suffice,  irrespective  of  the  fact  of 
its  adequacy.     The  courts   do  not   sit  to  make  bargains   for  the 

1B2  Rose  V.  Sims,  1  Bam.  &  Adol.  526. 

153  Balfour  v.  Sea  Fire  Life  Assur.  Co..  3  C.  B.  (N.  S.)  300;   Meltzer  v.  Doll, 
91  N.  Y.  365. 
164  Cook  V.  Wright,  30  Law  J.  Q.  B.  321. 
15  5  Smith  v.  Smith,  13  C.  B.  (N.  S.)  418. 

156  La  Touche  v.  La  Touche,  3  Hurl.  &  C.  576  (it  was  held  In  this  case  that  a 
promissory  note  given  by  a  married  woman  as  a  security  for  advances  made  to 
her  husband,  and  which  in  equity  binds  her  separate  estate,  is  a  good  considera- 
tion for  another  promissory  note  given  by  her  after  her  husband's  death  for  a 
balance  then  due,  although  the  former  note  is  barred  by  the  statute  of  limit- 
ations) ;   Wilton  v.  Eaton,  127  Mass.  174. 

157  Tnieman  v.  Fen  ton,  Cowp.  544. 

168  Eastu-ood  v.  Kenyan,  11  Adol.  &  El.  438. 

169  Southall  v.  Rigg,  11  C.  B.  481. 

160  Coward  v.  Hughes,  1  Kay  &  J.  443. 
181  Hill  V.  Wilson,  L.  R.  8  Ch.  App.  894. 


Ch.    7]  REAL    AND    PERSONAL    DEFENSES.  259 

parties.  Their  only  inquiry  is  whetlier  one  has  been  made.  And 
whether,  therefore,  the  party  making  the  bargain  has  gained  or 
lost  by  it  is  immaterial,  so  far  as  its  legality  as  an  obligation  i« 
concerned.^ ^2  And  the  rule  is  well  settled  that  the  consideration 
need  not  be  adequate,  though  it  must  be  of  value.  But  there  is  the 
distinction  ^^^  made  between  a  valuable  consideration  other  than 
money  and  a  money  consideration.  With  a  valuable  consideration  other 
than  money,  the  slightest  consideration  will  support  a  promise  to 
pay  the  largest  amount  to  the  full  extent  of  the  promise,  while 
with  a  money  consideration  the  consideration  will  support  a  promise 
to  pay  money  only  to  the  extent  of  the  money  forming  the  consid- 
eration. The  law  is  deemed  to  leave  the  measure  of  the  value  of 
a  valuable  consideration  other  than  money  for  a  promise  to  pay 
money  to  the  parties  to  the  contract ;  but  money,  being  the  standard 
of  value,  is  not  subject  to  be  changed  by  contract,  and  will  support 
a  promise  to  pay  money  only  to  the  amount  of  the  consideration. 

Consideration  is  also  classified  as  to  the  time  at  which  it  is  given, 
as  executory,  executed  and  past.  An  executory  consideration  is 
something  to  be  given  or  done  in  the  future;  an  executed  considera- 
tion is  some  act  or  forbearance  done  at  the  time  of  making  the 
contract;  ^^*  and  a  past  consideration  is  one  fully  performed  be- 
fore the  agreement  or  transaction  which  is  the  basis  of  the  con- 
tract relation  sought  to  be  created,  has  come  into  existence.  The 
two  former  satisfy  the  test  of  a  consideration  that  it  be  sufficient 
to  create  a  legal  obligation.  Each  of  them  is  a  sufficient  legal  rea- 
son for  supporting  a  contract  relation.  But  the  third  does  not 
satisfy  that  test.  Whatever  the  transaction  constituting  the  past 
consideration  may  have  been,  it  is  no  part  of  the  transaction  upon 
which  the  contract  is  based.  There  may  have  been  some  moral 
obligation  created  by  it.  It  may  have  been  the  motive  for  making 
the  new  contract.  But  neither  of  these  cases  has  the  pecuniary 
value  which  is  required  for  a  consideration,  and  neither  can  be 
treated  as  a  consideration  sufficient  to  support  a  new  contract,^®" 

162  Pilkington  v.  Scott,  15  Mees.  &  W.  660;  Bainbridge  v.  Firmstone,  8 
Adol.  &  E.  743;  Darrow  v.  Walker,  48  N.  Y.  Super.  Ct.  6. 

163  Sawyer  v.  Mcljouth,  46  Barb.  350;  Johns.  Cas,  Bills  &  N.  175. 

164  Leake,  Cont.  181. 

16  6  Lawson,  Cont.  §  100;   Anson,  Cont.  pp.  77-81;  Clark,  Cont.  §§  84-90. 


260  DEFENSES.  [Ch.   7 

although  it  may  be  Ihoir  outgrowth.  A  past  consideration  is  there- 
fore to  be  rejected  from  considerations  sufficient  to  support  con- 
ti'acts, — a  fact  to  be  Ivopt  in  mind  in  the  examination  of  tlie  ques- 
tion commonly  known  as  the  theory  of  the  antecedent  indebted- 
ness, hereinafter  discussed.^ °* 

Presumption  of  Consideration. 

Before  taking  up  the  phases  of  want,  failure,  or  illegality  of 
consideration,  so  common  in  cases  of  bills  and  notes,  it  remains  to 
speak  briefly  of  the  meaning  of  that  common  phrase  that  with  nego- 
tiable instruments,  in  the  first  instance,  consideration  is  presumed. 
This  relates  to  controversies  between  immediate  parties,  and  means 
that,  if  there  is  no  issue  as  to  the  consideration,  then  the  mere 
production  of  the  instrument  on  the  trial  is  sufiQcient.^®^  But 
where  the  issue  between  immediate  parties  specifically  pleaded  is 
consideration,  then  the  statement  in  the  instrument  of  value  re- 
ceived is  in  the  nature  of  an  admission  against  interest,  and  noth- 
ing more.  The  burden  of  proof  of  the  existence  of  a  consideration 
is  on  the  plaintiff,  and  in  case  of  a  conflict  of  evidence,  it  remains 
on  him  to  satisfy  the  jury  by  preponderance  of  evidence.^ °®  The 
fact  that  a  consideration  has  been  given  is  stated  in  the  instru- 
ment, and  that  the  instrument  is  in  writing  does  not  exclude  oral 
evidence  concerning  the  consideration.  And  if  the  instrument  was 
without  consideration  in  fact,  although  it  is  stated  on  its  face 
to  have  been  given  for  a  consideration,  this  may  be  shown  by  ex- 
trinsic testimony^^^  when  the  issue  is  as  to  the  consideration.  It 
seems  to  have  been  the  early  doctrine  that,  in  order  to  enable  the 
defendant  to  put  the  plaintiff  on  proof  of  consideration,  he  must 
give  the  plaintiff  notice.  But  it  is  the  rule  of  practice  at  present 
that  a  notice  to  prove  consideration  is  unnecessary,  and  it  is  not 

166  See  pages  293,  294,  post. 

107  Carnwright  v.  Gray,  127  N.  Y.  92,  27  N.  E.  835.  A  general  denial  is  Insuffi- 
cient to  raise  the  issue  of  consideration.  Sprague  v.  Sprague,  80  Hun,  285,  30 
N.  Y.  Supp.  1G2. 

168  Bruyn  v.  Russell,  60  Hun,  280,  14  N.  Y.  Supp.  591;  Terley  v.  Perley, 
144  Mass.  104,  10  N.  E.  72G;  Simpson  v,  Davis,  119  Mass.  269;  Delano  v. 
Bartlett,  6  Cush.  304;  Anthony  v.  Harrison,  14  Hun,  198.  But  possibly  a 
contrary  doctrine  is  held  in  Bottum  v.  Scott,  11  N.  Y.  St.  Kep.  514;  Olsen  v. 
Ensign,  7  Misc.  Rep.  (N.  Y.)  G82,  28  N.  Y.  Supp.  38. 

ie»  Abb.  Tr.  Ev.  pp.  404,  405. 


Ch.  7]  REAL  AND  PERSONAL  DEFENSES.  261 

now  given.  An  allegation  in  the  answer  that  the  note  is  without  con- 
sideration is  suflQcient.  At  present  the  plaintiff  makes  out  his 
prima  facie  case;  the  defendant  then  gives  evidence  in  dispute  of 
the  consideration, — whereupon  the  plaintiff  calls  his  witnesses  in 
rebuttal  of  this,  to  prove  it.^^** 

114.  Defenses  interposed  by  reason  of  some  defect  in  the 
consideration  are  usually  want  or  failure  of  consideration, 
and  illegality  of  consideration,  -whicli  does  not  avoid  the 
instrument. 

115.  As  between  immediate  parties,  a  partial  -want  or 
failure  of  consideration  is  a  defense  pro  tanto,  but  the 
part  alleged  to  have  failed  must  be  clearly  ascertained. 
But  these  are  not  defenses  to  an  action  brought  by  a  pur- 
chaser of  the  instrument  for  value  without  notice. 

116.  When  there  is  a  total  want  of  consideration  betw^een 
immediate  parties,  or  the  consideration  of  the  note,  though 
good  in  the  first  instance,  entirely  fails,  this  is  a  defense 
between  immediate  parties.  But  these  are  not  defenses 
to  an  action  broaght  by  a  purchaser  of  the  instrument  for 
value  without  notice. 

In  the  preceding  section,  in  attempting  to  outline  the  funda- 
mental theory  underlying  that  very  large  branch  of  the  subject 
of  negotiable  instruments, — consideration, — we  endeavored  to  show 
that  the  rule  was  that  the  first  test  of  a  legal  consideration  was 
that  it  must  have  substantial  value,  and  that  if  there  was  substan- 
tial value,  and  an  agreement,  then  there  was  a  legal  contract.  From 
this  it  naturally  follows  that  the  converse  of  this  rule  is  also  true, 
and  that  if  there  is  not  a  consideration  to  support  the  contract,  or 
if  there  is  what  seems  to  be,  but  in  fact  is  not,  a  consideration, 
then  the  contract  itself  fails,  and  the  contract  will  not  be  enforced 
by  the  courts.  The  doctrines  of  want  or  failure  of  consideration 
divide  themselves  into  the  questions  arising  from  total  want  or 
failure  of  consideration,  partial  want  or  failure  of  considera- 
tion, and  the  comparative  equities  of  the  rights  of  immediate  parties 

iTo  See  Wood's  notes  to  Byles,  Bills  &  N.  pp.  121,  122. 


262  DEFENSES.  [Ch.  7 

and  of  the  bona  fide  holder.  The  doctrine  of  failure  or  want  of 
consideration  is  to  be  scrutinized  to  distinguish  between  failure  of 
consideration  and  inadequacy  of  consideration;  between  whole 
and  partial  failure  of  consideration;  and  between  definite  and  indefi- 
nite want  or  failure  of  consideration.  And  while  it  cannot  be  said 
that  these  positions  are  fully  settled  by  authority  the  general  doc- 
trines of  the  cases  classify  the  rules  relating  to  want  or  failure  of 
consideration  as  follows: 

(1)  Total  failure  or  want  of  consideration  is  a  defense  in  an  action 
between  immediate  parties. 

(2)  In  case  of  a  pecuniary  consideration  or  of  property  having  an 
agreed  pecuniary  standard,  failure  of  a  definite  part  of  the  con- 
sideration is  a  defense  pro  tanto  between  immediate  parties. 

(3)  In  case  of  partial  failure  of  an  unliquidated  consideration,  re- 
coupment or  counterclaim  may  be  allowed. 

(4)  A  want  of  a  defined  part  of  a  consideration  is  a  defense  pro 
tanto. 

(5)  Defenses  of  total  or  partial  failure  or  want  of  consideration  do 
not  avail  against  the  purchaser  for  value  without  notice. 

Failure  or  want  of  consideration  is  not  the  same  thing  as  its  in- 
adequacy. Inadequacy  means  that  where  values  are  exchanged 
one  value  does  not  equal  the  other;  failure  of  consideration  means  a 
diminution  of  value  from  that  expressly  or  impliedly  agreed  to  be 
the  values  exchanged  in  transfer;  and  want  of  consideration  means 
no  value  at  all  given  for  value  received.  In  the  transfer  of  property 
the  fact  that  the  property  was  not  worth  what  it  was  supposed  to 
be,  if  there  is  no  fraud,  is  no  defense  in  an  action  for  ihe  purchase 
price.  And  when  the  question  is  one  of  adequacy,  courts  will  not 
inquire  into  the  actual  pecuniary  value  of  a  consideration,  but  will 
leave  the  parties  to  such  estimates  thereof  as  they  have  formed  in 
making  their  contract.  A  party  will  not  be  allowed  to  interpose  as 
a  defense  the  fact  that  the  property  w^as  not  pecuniaril}'  worth  w^hat 
he  supposed  it  to  be,  or  that  he  has  received  no  actual  benefit  from 
it,  or  that  the  other  party  derives  greater  benefit  from  the  con- 
sideration than  he  does.  And  inadequacy  is  distinguished  from  fail- 
ure or  want  of  consideration  in  that  at  the  time  of  making  the  bill 
or  note  no  part  of  the  consideration  was  wanting,  or  that  no  part  of 
it  had  subsequently  failed.     It  was  complete  on  making  the  con- 


Ch.  7]  REAL  AND  PERSONAL  DEFENSES,  263 

tract,  and  had  changed  in  no  respect  at  the  time  of  bringing  the 
action.  The  amount  agreed  to  bo  paid  in  the  bill  or  note  was  the 
value  set  by  the  parties  upon  the  consideration  itself,  and  courts 
do  not  sit  to  change  this  and  to  make  contracts,  but  only  to  enforce 
those  the  parties  have  already  made.^^^ 

Except,  then,  where  money  is  paid  for  a  bill  or  note,  any  other 
valuable  thing  will  suffice  as  a  reason  for  the  enforcement  of  the 
instrument.  In  such  cases  as  a  voluntary  gift  of  a  note;^^^  or  its 
indorsement  as  a  gift;^'^^  or  where  a  plaintiff  and  defendant,  as 
executors  of  an  estate,  exchanged  notes  with  the  intent  of  assuring 
payment  against  each  other  in  an  impending  arbitration,  and  it  was 
sought  to  construe  these  notes  as  promises  which  charge  them  per- 
sonally;^'^* or  where  two  persons  gave  notes  contingent  upon  the 
fact  that,  if  tliey  were  paid  in  the  future,  the  payee  would  convey  to 
him  certain  lands,  which  in  fact  were  never  conveyed, — in  all  such 
cases,  we  say,  there  is  no  consideration  for  the  promise.  In  them 
the  promise  is  a  nudum  pactum.  The  courts  will  not  compel  parties 
to  pay  money  to  a  party  from  whom  they,  in  turn,  had  received  noth- 
ing. Hence  the  entire  want  of  consideration  between  immediate 
parties  destroys  all  remedy  upon  the  bill  or  note,  because,  as  be- 
tween immediate  parties,  the  negotiable  instrument  is  governed  in 
this  respect  by  the  general  rules  of  contract  law. 

These  reasons,  however,  do  not  apply  where  the  consideration  has 
changed  in  whole  or  in  part  from  that  in  contemplation  of  the  par- 
ties at  the  time  of  making  the  contract.  Its  change  may  have  ren- 
dered it  either  totally  or  partially  worthless.  In  case  of  partial 
worthlessness,  the  worthless  part  may  be  a  clearly  defined  part  of 
the  whole,  or  be  indissolubly  bound  up  with  it.  And  these  aspects 
of  failure  of  consideration,  when  complicated  with  the  various  dif- 
ferent systems  of  the  administration  of  remedies,  have  presented 
problems  of  some  difficulty  for  the  courts  to  decide,  and  this  diffi- 

171  Worth  V.  Case,  42  N.  Y.  3G2;  Earl  v.  Peck,  64  N.  Y.  596;  Hamer  v.  Sid- 
way,  124  N.  Y.  538,  27  N.  E.  256;  Anson,  Cont.  63;  Sbadwell  v.  Sbadwell,  9 
C.  B.  (N.  S.)  159;  Lindell  v.  Rokes,  60  Mo,  249;  Trickey  v.  Lanie,  6  Mees.  & 
W.  278;  Tye  v.  Gwynne,  2  Camp.  346. 

172  Peai-son  v.  Pearson,  7  Johns.  26. 

173  Schoonmaker  v.  Roosa,  17  Johns.  301. 
17*  Wiutei-  V.  Living-stou,  13  Johns.  54. 


264  DEFENSES.  [Ch.  7 

culty  has  resulted  in  some  confusion  in  the  decisions  of  various  jur- 
isdictions. The  rules  are  the  same  whether  the  consideration  which 
fails  be  executed  or  executory.  Examples  of  an  executed  con- 
sideration which  has  failed  are  property  for  which  a  note  has  been 
given,  but  which  has  been  taken  in  execution/"  or  notes  given  for 
insurance  i>remiums  upon  the  policy  of  a  company  which  has  no  legal 
right  to  insure.^^*  In  both  of  those  cases  it  was  held  that  there  was 
a  total  failure  of  consideration,  and  that,  as  between  immediate  par- 
ties, it  was  a  sufficient  defense.^'^  The  availability  of  this  as  a  de- 
fense, however,  seems  to  depend  upon  two  alternatives.  The  trans- 
action either  must  be  at  once  rescinded,  the  consideration  returned, 
and  the  parties  placed  as  nearly  as  may  be  in  statu  quo,^^*  or  else 
the  consideration  must  be  proved  to  be  completely  worthless,  for 
otherwise,  if  the  consideration  be  retained,  the  question  is  sometimes 
treated  as  one  of  inadequac}^,  and  the  obligation  may  be  deemed 

17  6  Chenault  v.  Bush,  84  Ky.  528,  2  S.  W.  160. 

176  Barbor  v.  Boehm,  21  Neb.  450,  32  N.  W.  221. 

177  Lightbody  v.  Ontario  Bank,  11  Wend.  (N.  Y.)  9.  This  was  a  case  where 
bank  bills  were  received  in  payment,  and  the  bank  issuing  the  bills  had  stop- 
ped payment  at  the  time  when  the  bills  were  so  received,  but  the  fact  of  the 
bank's  failure  was  not  then  known  to  the  pai-ties.  In  his  decision.  Savage, 
C.  J.,  said:  "The  question  is  which  of  these  parties  shall  sustain  the  loss 
which  has  happened  in  this  case.  *  *  *  In  the  case  of  the  payment  of  a 
counterfeit  or  forged  bill,  it  is  settled  that  the  debtor  is  not  discharged,  and 
it  is  not  perceived  why  the  same  principle  should  not  prevail  where  the  pay- 
ment is  made  in  the  bill  of  a  bank  which  has  stopped  payment.  In  each  case 
the  debtor  parts  with  that  which  has  no  value,  and  the  creditor  does  not  x'e- 
ceive  value  for  his  debt."  In  the  case  of  Camidge  v.  Allenby,  6  Barn.  &  G. 
373,  9  Dowl.  &  R.  391,  it  appeared  that  a  vendee  delivered  to  the  vendor,  in 
payment  for  goods,  promissory  notes  on  the  bank  of  D.  &  Co.  This  occurred 
at  3  o'clock  in  the  afternoon,  and  D.  &  Co.  stopped  payment  at  11  o'clock  in 
the  forenoon  of  the  same  day  (December  10th).  The  vendor  never  presented 
the  bills,  but  on  December  17th  he  requu'ed  the  vendee  to  take  back  the  notes, 
and  pay  him  the  amount.  This  was  refused,  and  on  trial  it  was  held  that  the 
vendor  was  guilty  of  laches,  and  had  thereby  made  the  notes  his  own,  and 
consequently  that  they  operated  as  a  satisfaction  of  the  debt.  In  the  case  of 
Bayard  v.  Shunk,  1  Watts  &  S.  (Pa.)  92,  it  was  held  that  the  debt  was  dis- 
charged by  a  payment  in  bank  notes,  though  the  bank  had  previously  failed, 
both  parties  being  ignorant  of  the  fact. 

178  Burton  v.  Stewart,  3  Wend.  236;  Lewis  v.  Cosgrave,  2  Taunt  2;  Leg- 
gett  V.  Cooper,  2  Starkie,  103;  Fisher  v.  Samuda,  1  Camp.  191, 


Ch     7]  REAL    AND    PERSONAL    DEFENSES.  265 

binding,^^'  Cases  of  executory  consideration  are  where  the  pur- 
chaser of  a  patent  gave  his  note  for  it  and  the  patent  subsequently 
proved  void/^°  or  where  a  vendee  bought  goods  of  a  certain  kind 
which  the  vendee  failed  to  deliver.^^^  In  such  cases  the  rules  are 
also  either  that  there  must  be  instant  rejection  of  the  goods  after 
an  opportunity  to  examine  them,  or  else  the  goods  must  be  shown  to 
have  been  valueless.  Of  course,  if  there  was  involved  in  the  facts 
of  the  case  a  breach  of  warranty  which  survives  the  acceptance  of 
the  goods,  it  lays  the  basis  for  a  cross  action  or  counterclaim,  and  is 
an  exception  to  the  principle  stated.^  ^^  It  is  the  better  rule  in  case 
of  executory  considerations  that,  as  between  immediate  parties,  a 
partial  performance  of  the  consideration  allows  only  a  recovery  for 
the  part  performed  upon  the  bill  or  note  given  for  the  consideration 
itself,^ ^^  though  this  rule  is  disputed  by  many  cases.^®*  This  conflict 
of  authorities  is  due  not  so  much  perhaps  to  the  actual  merits  of  the 
question  as  to  rules  of  practice  arising  upon  questions  of  recoup- 
ment, offset,  cross  demand,  and  counterclaim,  and  whether  these 
remedies  may  be  administered  in  the  action  in  which  recovery  upon 
the  bill  or  note  is  sought.  But  these  questions  are  happily  becoming 
obsolete  as  state  after  state  substitutes  the  civil  action  and  code 
procedure  for  the  common-law  action  and  equity  suit.  The  provision 
of  the  Codes  that  a  defendant  may  avail  himself  of  any  defense  which 
tends  to  defeat  or  diminish  the  plaintiff's  recovery  and  which  is  a 
cause  of  action  arising  out  of  the  contract  or  transaction  set  forth  in 
the  complaint  as  the  foundation  of  the  plaintiff's  claim  or  connected 
with  the  subject  of  the  action,  or  that  it  may  be  any  new  matter 
constituting  a  defense,  it  is  hoped  will  allow  the  establishment  of  a 
rule  that  a  failure  of  a  part  of  the  consideration,  if  definite,  will  allow 
a  recovery  pro  tanto;   if  indefinite,  a  recoupment  of  damages.     Now, 

17  9  Burton  v.  Stewart,  3  Wend.  236;  Johnson  v.  Titus,  2  Hill,  608. 

180  Dickinson  v.  Hall,  14  Pick.  217. 

181  Wells  V.  Hopkins,  5  Mees.  &  W.  7. 

182  Norton  v.  Dreyfuss,  106  N.  Y.  91,  12  N.  E.  428;  Brigg  v.  Hilton,  99  N.  Y. 
517,  3  N.  E.  51;  Day  v.  Pool,  52  N.  Y.  416. 

183  Sawyer  v.  Chambers,  44  Barb.  43;  Union  Foundry  &  P.  C.  W.  Works  v. 
New  York  L.  D.  Co.,  13  N.  Y.  St  Rep.  701;  Fisher  v.  Shai-pe,  5  Daly,  214; 
Murphy  v.  Lippe,  35  N.  Y.  Super.  Ct.  542. 

184  Fletcher  v.  Chase,  16  N.  H.  38;  Stone  v.  Peake,  16  Vt  218;  HaiTington 
Y.  Lee,  33  Vt  249;   Evans  v.  Williamson,  79  N.  C.  96. 


266  DEFENSES.  [Ch.  7 

however,  the  rules  seem  to  be  somewhat  ill-defined,  but  ns  nearly  as 
may  be  stated  are  as  follows: 

(1)  If  there  is  entire  failure  to  give  good  title  to  chattels  or  land 
it  is  a  defense;  **'  if  it  is  a  mere  defect  of  title  capable  of  ascertain- 
ment in  money,  and  the  loss  is  borne  by  the  purchaser,  it  is  a  defease 
pro  tanto;  ^«^  if  it  is  a  defect  in  which  the  loss  is  not  borne  by  the 
purchaser,  it  is  not  a  defense.^ ®^ 

(2)  If  the  failure  is  of  part  of  a  money  consideration,  or  one  ca- 
pable of  definite  computation,  it  is  a  good  defense  pro  tauto.^^® 

(3)  If  the  failure  is  in  the  value  of  goods  delivered,  and  is  incapable 
of  ascertainment,  it  is  no  defense,  being  in  the  nature  of  inadequacy 
of  consideration,  as  already  shown.  But  if  this  failure  in  value  is 
a  distinct  part  of  the  consideration,  and  is  due  either  to  a  failure  of 
the  quality  or  the  quantity  of  the  goods,  it  is  a  defense  pro  tanto.^^® 

(4)  If  the  failure  of  consideration  arises  from  failure  to  perform  an 
agreement,  it  is  a  defense  pro  tanto.^®** 

These  reasons  apply  to  want  of  consideration,^®*  or  want  of  a  de- 
fined part  of  it.^®*     In  the  former  event  the  contract  is  unenforce- 

185  Rock  V.  Nichols,  3  Allen,  342;   Moitow  v.  Brown,  31  Ind.  378;   Peterson 
V.  Johnson,  22  Wis.  21;   Stewart  v.  Insall,  9  Tex.  397. 
188  Doremus  v.  Bond,  8  Blackf.  368;   Holman  v.  Creagmiles,  14  Ind.  177. 

187  Bring:ham  v.  Lighley,  61  Ind.  524. 

188  Byles,  Bills,  132;  Chit.  Bills,  86;  1  Edw.  Bills  &  N.  §  469;  Darnell  v. 
Williams,  2  Starkie,  166;  Jefferies  v.  Austin,  Strange,  674;  Gamble  v.  Grimes, 
2  Ind.  392;  Morgan  v.  Fallenstein,  27  111.  31;  Black  v.  Ridgway,  131  Mass.  8D. 

189  Agra  &  Masterman's  Bank  v.  Leigh  ton,  L.  R.  2  Exch.  56.  It  was  held 
in  this  case  that,  in  an  action  by  the  indorsee  of  a  bill  of  exchange  against 
the  acceptor,  a  plea  stating  that  the  bill  was  given  for  goods  to  be  supplied 
by  the  drawer,  and  that  only  part  of  the  goods  were  supplied,  of  which  the 
defendant  accepted  a  part,  and  that  by  reason  of  the  non-completion  of  the 
contract  the  pail  supplied  became  valueless  to  him,  and  also  showing  that 
the  plaintiff  is  not  a  holder  for  value,  will  be  good.  And  see  Dunnent  v.  Tat- 
tle, Johns.  Gas.  Bills  &  N.  178.  Hammett  v.  Barnard,  1  Hun,  198.  Though 
see  cases  holding  no  defense  unless  there  was  a  warranty.  Welch  v.  Carter, 
1  Wend.  185;  Reed  v.  Prentiss,  1  N.  H.  174;  Bryant  v.  Pember,  45  Vt,  487; 
Detrick  v.  McGlone,  46  Ind.  291;  Richards  v.  Betzer,  53  111.  466. 

100  Watson  V.  Russell,  3  Best  &  S.  34;  Miller  v.  Wood,  23  Ark.  546;  Jef- 
fries V.  Lamb,  73  Ind.  202. 

191  Anthony  v.  Harrison,  14  Hun,  198. 

192  Seeley  v.  Engell,  13  N.  Y.  542. 


Ch.  7]  REAL    AND    PERSONAL    DEFENSES.  267 

able;  in  the  latter,  enforceable  only  pro  tanto.^®"  And  this  leaves 
us  to  consider  the  position  of  the  bona  fide  holder  when  confronted 
with  these  defenses  raised  against  him. 

The  purchaser  for  value  without  notice  purchases  upon  a  consid- 
eration an  order  or  promise  to  pay  money.  He  is  not  bound  in  any 
way  to  inquire  into  the  circumstances  which  gave  the  paper  birth.  If^ 
for  example,  the  maker  defends  that  the  consideration  for  a  note  is  a 
contract  which  is  wholly  or  partly  unperformed,  and  the  considera- 
tion has  so  far  failed,  the  answer  is  that  the  maker  has  issued  to 
the  world  a  negotiable  promise  to  pay  money  absolutely  in  consid- 
eration of  the  promise  of  the  payee  to  do  some  act  for  his  benefit 
in  the  future.  That  the  payee  has  failed  to  do  this  is  no  reason  why 
the  bona  fide  holder  should  be  deprived  of  the  benefit  of  the  maker's 
promise,  which  he  has  bought  He  has  taken  no  part  in  the  delin- 
quencies of  the  payee,  and  they  therefore  cannot  be  charged  against 
him.  In  other  words,  his  equities  are  superior  to  those  of  the  maker, 
who  must  look  for  his  remedy  to  the  payee.^^*  And  so  in  the  other 
cases  involving  want  or  failure  of  consideration,  the  defenses  consist 
of  personal  transactions  between  immediate  parties,  in  which  the 
bona  fide  holder  has  no  part,  and  with  which  he  is  not  chargeable. 
The  reasons  for  holding  accommodation  parties  have  been  already 
explained.^"'  And  in  other  cases  already  mentioned,  as  for  patents 
proven  void,^^"  or  for  the  purchase  of  lands  to  which  the  title 
fails,^®^  or  for  goods  purchased  and  partly  delivered,^'*  the  answer 
is  the  same, — that  an  absolute  promise  or  acceptance  to  pay  to  order 
has  been  issued,  and  must  be  lived  up  to,  when  in  the  hands  of  a 
purchaser  who  has  bought  it  in  reliance  upon  the  promise. 

117.  ILLEGAL  CONSIDERATION.  —  A  consideration 
may  be  rendered  illegal  by  statute,  or  by  the  rules  of 
common  law,   or   because   it  is   against  public  "welfare  ta 

193  Aubert  v.  Maze,  2  Bas.  &  P.  373;  Forman  v.  Wright,  11  C.  B.  481;  Par- 
ish V.  Stone,  14  Pick.  198. 

194  Davis  V.  McCready,  17  N.  Y.  230. 
19  6  See  supra,  p.  173. 

19  6  Smith  v.  Hiscock,  14  Me.  449. 
19  7  Vallett  V.  Parker.  6  Wend.  615. 
198  Baldwin  v.  Killian,  63  111.  550. 


268  DEFENSES.  [Ch.  7 

treat  the  consideration  as  a  valid  legal  consideration.  An 
illegal  consideration,  -whether  total  or  partial,  renders  the 
instrument  unenforceable,  as  bet^ween  immediate  parties, 
but  it  is  not  in  general  a  defense  to  the  action  of  the  pur- 
chaser for  value  without  notice. 

A  brief  statement  of  that  broad  topic  of  the  general  law  of  con- 
tracts known  as  "illegal  consideration"  is  as  follows: 

Since  every  contract  is  but  an  agreement  enforceable  by  law,  to  be 
enforceable  it  must  be  for  some  object  which  the  law  can  recognize. 
The  law  refuses  to  recognize  rights  arising  out  of  three  general 
classes  of  subjects,  and  to  enforce  contracts  made  with  reference  to 
them.     They  are: 

(1)  Those  prohibited  by  statute. 

(2)  Those  prohibited  by  express  rules  of  common  law  with  refer- 
ence to  objects  which  the  law  deems  evil  or  immoral. 

(3)  Those  which  contravene  public  policy. 
Statutory  Prohibition. 

The  statutes  which  prohibit  considerations  and  render  them  ille- 
gal are  commonly  classified  as  follows: 

(1)  Those  which  forbid  a  transaction  constituting  a  consideration, 
and  declare  the  contract  growing  out  of  it  void. 

(2)  Those  which,  for  the  public  w'elfare,  attach  a  penalty  to  a 
transaction  constituting  a  consideration,  and  thus  by  implication 
forbid  the  making  of  any  contract  growing  out  of  it. 

(3)  Those  which  declare  a  consideration  illegal,  but  do  not  say 
that  it  shall  avoid  the  contract. 

(4)  Those  which  attach  no  penalty  to  a  consideration,  but  which 
enact  that  the  consideration  is  illegal,  and  that  the  agreement  rest- 
ing upon  it  shall  not  be  enforced. 

(5)  Those  which  enjoin  certain  penalties,  conditions,  or  regula- 
tions upon  the  conduct  of  a  business  or  profession,  but  which  attach 
no  specific  penalty  to  any  specific  transaction.^^" 

These  five  classes  of  statutes  are  in  turn  distinguished  as  those 
which  avoid  the  consideration,  either  by  express  declaration,  or  by 
imposing  a  penalty  upon  it,  and  those  which  merely  declare  the  con- 
is*  PoL  Cont.  pp.  254-2G1. 


Ch.   7]  REAL    AND    PERSONAL   DEFENSES.  269* 

sideration  illegal.  The  important  difference  between  these  two 
classes  is  that,  as  already  shown,  the  former  is  a  defense  to  the  in- 
strument in  the  hands  of  a  bona  fide  holder,2°*>  while  the  latter  is 
not.  The  statutes  of  the  latter  class,  however,  so  generally  out- 
number those  of  the  former,  that  it  may  be  said  to  be  the  rule  that 
the  title  of  an  innocent  holder  for  value  cannot  be  impeached  by  any 
illegality  in  the  transactions  between  prior  parties,-"^  the  exceptions 
being,  of  course,  where  the  statutes  expressly  forbid  the  considera- 
tion and  avoid  the  contract  growing  out  of  it,  or  where  the  plain 
intention  of  the  penalty  afQxed  by  the  statute  to  the  transaction  is 
to  forbid  it,  and  thus  the  contract  is  avoided.  The  reason  for  this 
rule  is  the  one  so  general  in  cases  involving  consideration,  that  when 
one  of  two  innocent  persons  must  suffer  by  the  acts  of  a  third,  he 
who  has  enabled  such  third  person  to  occasion  the  loss  must  sustain 
it.^°^  It  is  true  that  the  innocent  maker  or  acceptor  may  suffer 
from  the  violation  of  a  statute  which  was  perhaps  meant  to  protect 
him.  Either  or  both  of  these  prior  parties  may  have  done  something 
forbidden,  and  the  court  in  enforcing  the  bill  or  note  may  be  enforc- 
ing a  violation  of  the  statutes,  yet  the  bona  fide  holder  is  no  acces- 
sory to  the  illegality,  nor  can  the  statute  be  used  to  shield  the 
wrongdoer.  The  transaction,  whatever  it  may  have  been,  was  one 
of  which  the  bona  fide  holder  knew  nothing,  and  in  which  he  took  no 
part.  Tlie  only  thing  with  which  he  had  to  do  was  the  purchase  of  k 
promise  or  order  to  pay  money,  which  he  asks  the  court  to  enforce. 
And  the  courts  respond  to  his  suit  by  saying  to  the  prior  parties 

200  See  supra,  pp.  223-225.  It  was  said  by  Cliristiancy,  J.,  in  Paton  v.  Colt, 
5  Micli,  505,  that  whenever  the  considei-ation  of  the  paper  between  the  orig- 
inal parties  has  been  illegal,  especially  if  in  violation  of  a  positive  prohi- 
bition of  statute,  proof  of  such  illegality  throws  upon  the  holder  the  burden 
of  proving  that  he  got  it  bona  fide,  and  gave  value  for  it.  To  the  same  effect, 
see  Bailey  v.  Bid  well,  13  Mees.  &  W.  73;  Harvey  v.  Towers,  G  Exch.  6.^6; 
Northam  v.  Latouche,  4  Car.  &  P.  140;  Vallett  v.  Parker,  6  Wend.  (N.  Y.) 
615;    Story,  Bills.  §  193. 

201  Thus,  in  Potter  v.  Tubb,  1  Chit.  Jr.  Bills,  430.  which  was  an  action 
against  the  acceptor  of  a  bill,  by  the  payee,  it  was  held  that  the  fact  the  con- 
sideration for  the  acceptance  was  a  debt  due  to  the  drawer  by  the  acceptor 
for  smuggled  goods  was  no  defense  against  the  plaintiff,  unless  the  bill' 
were  given  him  for  a  smuggling  debt. 

202  Vallett  V.  Parker,  G  Wend.  G15;   Willmailh  v.  Crawford.  10  Wend.  S4L 


270  DEFENSES.  [Ch.  7 

who  have  suffered  by  or  committed  the  illegality  that  their  wrongs 
must  be  settled  elsewhere  than  in  his  suit,^°'  and  are  no  answer  to 
his  claim. 

The  statutes  which  declare  a  consideration  illegal  vary  widely  in 
their  topics  and  language  in  the  different  states.  Very  common  ex- 
amples are  a  bill  or  note  executed  on  Sunday,-"*  or  a  bill  or  note 
given  for  intoxicating  liquors.-"'^  These  cases  are  but  examples  of 
the  general  principle,  whatever  be  the  wording  of  the  particular 
statute.  Thus,  from  the  New  York  point  of  view,  before  the  repeal 
of  the  Sabbath  observance  act,^°'  a  contract  made  on  Sunday  was  not 
void  at  common  law.  And  in  New  York  it  was  declared  to  be  good 
unless  it  was  in  contravention  of  some  express  statute  forbidding 
it.^°^  The  statute  in  that  state  regulating  the  Sabbath  observance 
was  meant  to  be  in  harmony  with  the  religion  of  the  state  and  the 
religious  sentiment  of  the  public,  and  for  the  support  and  mainte- 
nance of  public  morals  and  good  order.  Acts  which  did  not  violate 
the  purpose  of  this  statute,  and  did  not  disturb  and  hinder  those 
who  for  themselves  desired  to  enjoy  Sunday,  were  not  prohibited.^*^* 
Bargains  made  on  Sunday  were  enforceable.  And  it  is  to  be  inferred 
that  bills  and  notes  given  on  Sunday  were  good  unless  th5y  were 
for  something  prohibited  by  statute  to  be  done,  as  for  the  enforce- 
ment of  work  done  on  Sunday  exclusively.^"^  So  that  in  New  York, 
although  there  is  little  express  authority  on  the  point,  it  seems  safe 
to  say  that  since  the  Sunday  laws  in  the  majority  of  instances  would 
probably  not  be  treated  as  defenses  to  actions  upon  bills  and  notes 
between  immediate  parties,  they  would  be  still  less  apt  to  be  al- 
lowed in  case  of  a  suit  by  the  bona  fide  holder.  In  other  states,  as 
between  immediate  parties,  the  question  turns  first  upon  the  wording 

208  City  Bank  v.  Barnard,  1  Hall,  80;  Gould  v.  Armstrong,  2  Hall,  2G5;  Hill 
▼.  Northnip,  4  Thomp.  &  C.  120;   Grimes  v.  Hillenbrand,  6  Tliomp.  &  C.  620. 

204  Saltmarsh  v.  Tuthill,  13  Ala.  390;   Vinton  v.  Peck.  14  Midi.  287. 

205  Cazet  v.  Field,  9  Gray.  329;  Nonls  v.  Langley,  19  N.  H.  423;  Pindar 
V.  Barlow.  31  Vt.  529. 

206  Laws  1880.  c.   593. 

207  Boynton  v.  Page,  13  Wend.  425;    Sayles  v.  Smith,  12  Wend.  57, 
20  8  Smith  V.  Wilcox,  24  N.  Y.  354. 

209  Merritt  v.  Earle,  31  Barb.  38,  affirmed  29  N.  Y.  115;  Batsford  v.  Every, 
44  Barb.  020;  McNamee  v.  McNamee,  9  N.  Y.  St.  liep.  720;  Suu  Printing  & 
Pub.  Ass'n  V.  Tribune  Ass'n,  44  N.  Y.  Super.  Ct.  130. 


<Jh.   7j  REAL    AND    PERSONAL    DEFENSES.  271 

and  interpretation  of  the  statute  itself.  If  the  statute  expressly  pro- 
hibits the  making  of  contracts  on  Sunday,  then  it  is  a  defense  as 
between  immediate  parties.  Again,  if  it  provides  that  no  person 
shall  do  any  work,  labor,  or  business  on  Sunday,  then  the  making 
of  a  bill  or  note  is  the  making  of  a  contract,  is  secular  business  within 
the  meaning  of  the  statute^  and  is  a  defense  between  immediate 
parties.  But  if  it  prohibits  only  servile  work,  or  the  work,  labor, 
or  business  of  a  person's  ordinary  calling,  then  the  making  of  a  bill 
or  note  is  not  within  the  prohibition  of  the  statute,  and  the  statute 
does  not  apply.^^"  Where,  however,  it  is  conceded  that  the  statute 
does  apply  to  the  case  of  the  bill  or  note,  then  the  question  becomes 
one  of  the  delivery  of  the  instrument.  The  bill,  note,  or  indorsement 
is  noVexecuted  until  delivered.^^^  And  though  dated  or  signed  on 
gunday,^^''  it  has  no  life  as  a  contract  until  the  day  of  its  delivery. 
But  if  dated  and  signed  and  delivered  on  Sunday,  or  dated  and  signed 
on  a  secular  day  and  delivered  on  Sunday,^"  the  instrument  is  un- 
enforceable between  immediate  parties,^^*  unless  the  party  prosecut- 
ing it  shows  that  it  was  delivered  on  a  secular  day.^^"*  The  pre- 
sumption from  its  being  dated  on  Sunday  is  that  it  was  delivered  on 
that  day,  and  its  date  is  notice  to  all  parties  of  its  delivery  on  Sunday, 
and  its  invalidity.^^'  It  is  this  notice  which  destroys  its  validity 
in  the  hands  of  the  purchaser  for  value.  For  if  the  instrument  is 
dated  on  Sunday,  he  is  presumed  to  know  it  was  delivered  on  that 
day,  and  so  is  a  purchaser  with  notice.  But,  on  the  other  hand,  if 
the  contract  was  actually  made  on  Sunday,  but  there  Is  no  legal 
reason  for  charging  the  purchaser  for  value  with  knowledge  of  this 

210  Clark.  Cont.  pp.  394.  395. 

211  See  supra,  pp.  69,  133. 

212  Conrad  v.  Kinzie,   105  Ind.  281,  4  N.  E.  863. 

213  Allen  V.  Deming,  14  N.  H.  133;  Bank  of  Cumberland  v.  Mayberry,  48 
Me.  198. 

214  Bank  of  Cumberland  v.  Mayberry,  48  Me.  198;  Pope  v.  Linn,  50  Me. 
86;  State  Capital  Bank  v.  Thompson,  42  N.  H.  370;  Ball  v.  Powers,  62  G.i. 
757;    Brimhall  v.  Van  Campen,  8  Minn.  13  (Gil.  1), 

215  Drake  v.  Rogers,  32  Ma  524;  Lovejoy  v.  Whipple,  18  Vt.  379:  Aldridge 
V.  Branch  Bank,  17  Ala.  45;   Trieber  v.  Commercial  Bank,  31  Ark.  128. 

216  Hilton  V.  Houghton,  35  Me.  143:  Winchell  v.  Carey,  115  Mass.  560; 
Clough  V.  Davis,  9  N.  H.  500;  King  v.  Fleming,  72  111.  21;  Cranson  v.  Goss, 
107  Mass.  439;    Sinclair  v.  Baggaley,  4  Mees.  &  W.  312. 


272  DEFENSES.  [Ch.  7 

fact,  then  the  illegality  of  the  contract  is  no  defense  against  the  bona 
fide  purchaser,  and  he  takes  the  bill  or  note  free  from  equities."'' 
Or  in  other  words,  to  apply  the  tests  given,  the  Sunday  laws  are  in 
general  of  that  class  which  render  the  consideration  illegal,  not  void, 
and  are  therefore  not  a  defense  against  the  purchaser  for  value,  un- 
less he  has  notice  that  the  bill  or  note  was  given  in  violation  of  the 
statute.  These  tests  apply  and  reasons  govern  in  the  application 
of  the  statutes  which  render  the  bill  or  note  unenforceable,  or  which 
seek  to  regulate  the  conduct  of  a  business  or  profession.  Examples 
are  the  traffic  in  intoxicating  liquors,^^*  or  statutes  requiring  law- 
yers, physicians,  and  surgeons  to  procure  a  license,  certificate,  or 
diploma  as  a  condition  precedent  to  the  right  to  practice  in  their 
profession,  or  statutes  regulating  dealings  in  articles  of  commerce. 
These  statutes  are  in  general  not  a  defense  to  negotiable  instru- 
ments prosecuted  by  the  bona  fide  holder. 
Common-Laio  Prohibition. 

Evil  or  immoral  considerations  affecting  negotiable  instruments 
are  those  which  are  made  in  breach  of  the  well-settled  rules  of  the 
common  law.  Bills  and  notes  based  upon  them  are  either  instru- 
ments given  in  consideration  of  committing  a  crime  or  a  civil  wrong, 
or  else  instruments  given  upon  a  consideration  in  fraud  of  the  rights 
of  third  persons.  Instances  of  the  first  kind  are  orders  or  promises 
in  consideration  of  committing  a  trespass  likely  to  lead  to  a  breach 
of  the  peace,  as  an  assault  upon  a  third  person,^^®  or  of  printing  a 
libel,^^°  or  of  commiting  a  civil  wrong  by  fraud  or  false  pretenses.^^^ 
WTierever  such  are  the  considerations  of  a  negotiable  instrument, 
the  court  will  refuse  to  enforce  the  instrument,  as  between  imme- 
diate parties.     The  agreements  based  upon  a  consideration  in  fraud 

217  Pope  V.  Linn,  50  IMe.  84;  State  Capital  Bank  v.  Thompson,  42  N.  H. 
370;  Cranson  v.  Goss,  107  Mass.  430;  Greathead  v.  Walton.  40  Conn.  226; 
Ball  V.  Powers,  62  Ga.  7.57;  Trieber  v.  Commercial  Bank,  31  Ark.  128;  Clin- 
ton Nat.  Bank  v.  Graves,  48  Iowa,  22S;   Knox  v.  Clifford,  38  Wis.  651. 

218  Cazet  V.  Field,  9  Gray,  329;  Norris  v.  Langley,  19  N.  H.  423;  Pindar  v. 
Barlow,  31  Vt.  529. 

219  Allen  V.  Rescous,  2  Lev.  174. 

220  Poplett  V.  Stockdale,  1  Ryan  &  M.  337;  Arnold  v.  Clifford,  2  Sumn.  238, 
Fed.  Cas.  No.  555;   Atkins  v.  Johnson,  43  Vt.  78. 

221  Materne  v.  Horwitz,  101  N.  Y.  470,  5  N.  E.  331;  Bloss  v.  Bloomer,  23 
Barb.  604;   Jerome  v.  Bigelow,  66  111.  452. 


Ch.  7]  REAL  AND  PERSONAL  DEFENSES.  273 

of  the  rights  of  third  persons  most  common  in  the  case  of  negotiable 
instruments  are  when  one  creditor  takes  a  bill  or  note  for  some  ad- 
vantage to  himself  over  other  creditors  who  have  united  with  him 
in  a  composition  of  their  debts  against  some  common  debtor.^-^  In 
such  a  case  each  creditor  acted  on  the  faith  that  the  engagement 
made  with  the  others  would  be  binding  upon  them,  and  each  had  the 
undertaking  of  the  rest  as  a  consideration  for  his  own  undertaking. 
The  beneficial  consideration  to  each  creditor  was  the  engagement  of 
the  rest  to  forbear.  "Every  composition  deed,"  says  Mr.  Justice 
Duer,-^^  "is  in  its  spirit,  if  not  in  its  terms,  an  agreement  between 
the  creditors  themselves,  as  well  as  between  them  and  the  debtor. 
It  is  an  agreement  that  each  shall  receive  the  sum  of  the  security 
which  the  deed  stipulates  to  be  paid  and  given,  and  nothing  more." 
A  private  agreement,  evidenced  by  a  bill  or  note,  therefore,  by  any 
one  creditor,  to  receive  more  than  his  composite  share,  is  a  fraud 
upon  the  rest,  and  the  courts  will  not  enforce  it.^^* 
Contravention  of  Public  Policy. 

The  commonest  cases  of  bills  and  notes  given  in  contravention  of 
public  policy  are  those  based  upon  considerations  tending  either  to 
injure  the  public  service,  or  obstruct  the  public  justice,  or  else  based 
upon  considerations  in  restraint  of  trade. 

"All  contracts  or  agreements,"  says  Comyn,  "which  have  for  their 
object  anything  against  the  general  policy  of  the  common  law  are 
void."  2^^  This  general  principle  is  particularly  applied  to  contracts 
which  have  for  their  object  the  perversion  of  the  operations  of  the 
government.^ ^°  Every  citizen  owes  to  his  government  and  all  its 
officers,  while  executing  their  official  duties,  truth  and  fidelity.  All 
the  actions  of  the  government  and  its  officers  are  based  upon  certain 
facts  assumed  or  proved,  and  falsehoods  with  reference  to  those  facts 
are  moral  wrongs,  injurious  to  the  whole  state  whose  government 
it  is,  and  therefore  against  public  policy.  Thus,  a  note  given  for 
forbearing  to  make  a  bid  on  a  government  mail  contract,^^^  or  a  note 

222  White  V.  Kuntz,  107  N.  Y.  518,  14  N.  E.  423. 

223  Breck  v.  Cole,  4  Sandf.  79-83. 

2  24  Bliss  V.  Matteson,  45  N.  Y.  22. 

226  1  Com.  Cont.  301;    Fonbl.  Eq.  bk.  1,  c.  4,  §  4. 

226  Gray  v.  Hook,  4  N.  Y.  449. 

227  Gulick  V.  Ward,  10  N.  J.  Law,  87. 

NEG. BILLS 18 


274  DEFENSES.  [Ch.  7 

given  to  procure  the  passage  of  a  legislative  act  by  sinister  means, 
is  void."^  It  is  public  policy  for  the  courts  to  put  the  stamp  of 
their  disapprobation  on  every  act,  and  pronounce  void  every  con- 
tract, the  ultimate  or  probable  tendency  of  which  would  be  to  sully 
the  purity  or  mislead  the  judgments  of  those  to  whom  the  high  trust 
of  legislation  is  committed.  These  are  also  the  reasons  of  the  com- 
mon-law rules  with  reference  to  considerations  touching  the  admin- 
istration of  public  justice.^^*  The  public  welfare  requires  that 
crimes,  for  example,  should  be  investigated  and  punished,  and  it  is 
the  duty  of  a  citizen  paramount  to  all  others  to  give  every  assistance 
to  this  end.-^°  Every  instrument  given  in  pursuance  of  an  agree- 
ment to  obstruct  justice  as  between  immediate  parties  is  void. 
Therefore  a  note  given  to  stop  an  intended  prosecution  for  felony 
and  not  to  appear  as  a  witness  before  the  grand  jury,  and  to  dismiss 
an  action  for  assault  and  battery,^^^  or  a  note  given  upon  a  consider- 
ation not  to  prosecute  the  maker's  son  for  forgery,^ ^^  is  illegal,  and 
cannot  be  enforced.  Agreements  based  upon  a  consideration  in  re- 
straint of  trade  are  held  against  public  policy  because  they  deprive 
the  public  of  the  services  of  men  in  the  spheres  in  which  they  are 
likely  to  be  most  useful,  and  expose  the  community  to  the  evils  of 
monopoly.  At  least  such,  according  to  the  text  writers,  was  the 
doctrine  of  the  early  common  law.  The  cases  were  classified  into 
three  divisions,  and  the  rules  pertaining  to  them  were  as  follows: 
(1)  When  the  contract  was  unlimited  in  time  and  space  and  in  total 
restraint  of  trade,  it  was  void.  (2)  When  the  restraint  was  limited  as 
to  space,  but  unlimited  as  to  time,  it  was  valid.  (3)  When  the  contract 
was  unlimited  as  to  space,  but  limited  as  to  time,  it  was  void.  And 
these  were  the  tests  applied  in  determining  whether  bills  and  notes 
were  void  or  valid' as  between  immediate  parties  in  cases  when  the  de- 

228  MiUs  V.  Mills,  40  N,  Y.  543;  Lyon  v.  Mitchell,  3G  N.  Y.  235;  Fuller  v. 
Dame,  18  Pick.  479;  Sedgwick  v.  Stanton,  14  N.  Y.  289;  Frost  v.  Inhabitants 
of  Belmont,  6  Allen,  159;  Tool  Co.  v.  Norris,  2  Wall.  45;  Marshall"  v.  Balti- 
more &  O.  R.  Co.,  16  How.  314. 

220  Henderson  v.  Palmer,  71  111.  579;  Roll  v.  Rasuet,  4  Ohio,  400,  418; 
Gorham  v.  Keyes,  137  Mass.  583:    Harris  v.  Brisco,  17  Q.  B.  Div.  504. 

230  Haynes  v.  Rudfl,  83  N.  Y.  lol.    See,  also,  Id.,  102  N.  Y.  372,  7  N.  E.  287. 

231  Gardner  v.  Maxey,  9  B.  Mon.  90. 

232  National  Bank  of  Oxford  v.  Kirk,  90  Pa.  St.  49. 


Ch.   7]  REAL    AND    PERSONAL    DEFENSES.  '275 

fense  that  the  consideration  was  in  restraint  of  trade  was  interposed. 
So  coal  combinations  are  in  restraint  of  trade,  and  a  check  given  for 
a  balance  due  on  such  a  combination  agreement  is  illegal.-"  And 
so  a  bill  or  note  given  to  further  the  objects  of  an  association  for  the 
regulation  of  freight  and  passage  rates  on  the  Erie  canal  is  illegal.^ ^* 
In  these  cases  it  is  obvious  that  such  contracts  are  public  in  their 
nature  and  against  the  public  welfare.  With  them  the  reason  for 
the  application  of  the  general  rule  is  clear.  But  when  the  consid- 
eration involves  a  transaction  between  private  individuals,  the  early 
doctrines  of  the  common  law  are  not  those  at  present  accepted  by  the 
courts.  Thus  instruments  based  upon  a  consideration  in  partial 
restraint  of  trade  between  individuals  are  undoubtedly  allowed,  the 
distinguishing  point  being  that  the  restriction  must  not  go  beyond 
what  is  reasonable  to  protect  the  favored  party,  regard  being  had 
to  the  nature  of  the  business  and  the  interests  of  the  public.-^ ^  And 
it  is  worthy  of  remark  that  the  tendency  of  recent  decisions  is  to 
relax  even  further  the  rigor  of  the  doctrine  that  all  contracts  in  gen- 
eral restraint  of  trade  are  void.  In  England  ^^®  it  is  denied  that 
such  has,  in  fact,  ever  been  the  law,  and  that  such  a  rule  is  the 
true  public  policy  is  doubted.  "If,"  said  Sir  George  Jessel,^^^  "there 
is  one  thing  more  than  any  other  which  public  policy  requires,  it  is 
that  men  of  full  age  and  competent  understanding  shall  have  the 
utmost  liberty  of  contracting,  and  that  contracts,  when  entered  into 
freely  and  voluntarily,  shall  be  held  good,  and  shall  be  enforced  by 
courts  of  justice.  The  theory  that  such  contracts  create  monopolies 
is  also  to  be  questioned.  Competition  is  not  stifled.  The  business 
is  open  to  all  other  persons.  And  it  seems  a  sounder  legal  theory 
to  say  that  a  party  may  legally  purchase  the  trade  and  business  of 
another  for  the  very  purpose  of  preventing  competition.     The  va- 

283  Morris  Run  Coal  Co.  v.  Barclay  Coal  Co.,  68  Pa.  St.  173. 

234  Stanton  v.  Allen,  5  Denio,  434. 

23  5Mitchel  V.  Keynolds,  1  P.  Wms.  181.  See  cases  chronologically  arranged 
in  2  Pars.  Cont.  p.  748,  note;  Nobles  v.  Bates,  7  Oow.  307;  Chappel  v.  Brock- 
way,  21  Wend.  157;  Diinlop  v.  Gregoiy,  10  N.  Y.  241;  Alger  v.  Thacher, 
19  Pick.  51;  Arnot  v.  Pittston  &  E.  Coal  Co.,  68  N.  Y.  558. 

236  Rousillon  V.  Rousillon,  14  Ch.  Div.  351. 

237  Printing  &  Numerical  Registering  Co.  v.  Sampson,  19  Eq.  Cas.  462. 


276  DEFENSES.  [Ch.   7 

lidity  of  the  contract,  if  supported  by  a  consideration,  will  depend 
upon  the  reasonableness  between  the  parties. -^* 
Effect  of  Illegality. 

Such  are  the  most  important  classifications  of  the  very  large  num- 
ber of  cases  involving  bills  and  notes  given  upon  considerations  ir> 
violation  of  statutes,  of  rules  of  common  law,  and  iu  contravention 
of  public  policy.  It  remains  to  speak  of  the  effect  of  the  illegality 
of  considerations  being  total  or  partial,  of  the  illegality  being  known 
to  all  the  parties,  and  the  rule  governing  illegal  or  immoral  consid- 
erations, and  those  in  contravention  of  public  policy,  when  used  as 
defenses  to  actions  brought  by  a  purchaser  of  the  instrument  for 
value  and  without  notice. 
Same — Illegality  as  being  Total  or  Partial. 

Partial  illegality  of  consideration  is  to  be  distinguished  from  par- 
tial lack  or  failure  of  consideration,  in  that  illegality,  whether  it  goes 
to  the  whole  consideration  or  only  part  thereof,  avoids  the  whole  bill 
or  note.  If  any  part  of  a  contract  is  void  for  illegality,  all  of  it  i» 
void.  The  courts  will  not  unravel  and  separate  considerations  which 
are  good  and  considerations  which  are  illegal,  and  allow  recovery 
for  those  which  are  good.  In  this,  illegal  considerations  which  avoid 
the  instrument  differ  from  instruments  which  cannot  be  enforced 
because  of  partial  lack  or  failure  of  consideration,  the  latter  being, 
as  has  already  been  said,  good  pro  tanto.  And  this  is  so  because 
it  is  impossible  to  say  whether  the  legal  or  illegal  portion  of  the  con- 
sideration most  affected  the  mind  of  the  maker  or  acceptor  in  making 
his  promise.  The  law  will  not  permit  him  thus  to  seek  to  evade  it» 
provisions  and  yet  stand  upon  and  recover  for  the  valid  part  of  the 
original  consideration.  Negotiable  instruments  are  not  contract* 
consisting  of  several  parts  based  on  several  transactions.  They  are 
not  of  the  kind  called  in  ordinary  contract  law  "severable."  As  ta 
them  the  gene^a^  rule  of  contracts  that,  where  the  promises  and 
considerations  are  severable,  an  illegal  consideration  is  a  partial  de- 
fense, does  not  apply.     But  on  the  contrary,  the  undoubted  rule  is 

238  Whittaker  v.  Howe,  3  Beav.  383;  Jones  v.  Lees,  1  Hurl.  &  N.  189; 
Leather  Cloth  Co.  v.  Lorsont,  9  Eq.  Cas.  345;  Collins  v.  Locke,  4  App.  Cas, 
674;  Oregon  Steam  Nav.  Co.  v.  Wlns'or,  20  Wall.  G4;  Morse  Twist  Drill  & 
Mach.  Co.  V.  Morse,  103  Mass.  73;  Diamond  Match  Co.  v.  Roeber,  106  N.  Y. 
473,  13  N.  E.  419;   Leslie  v.  Lorillard,  110  N.  Y.  510,  IS  X.  E.  3G3. 


Ch.   7]  REAL    AND    PERSONAL    DEFENSES.  277 

that  any  of  the  foregoing  kinds  of  illegal  considerations,  whether 
total  or  partial,  are  defenses  to  the  recovery  upon  any  part  of  the 
instrument  between  immediate  parties. 
Same — Knoidedge  of  Consideration — Intention. 

It  must  be  admitted  that  comparatively  few  cases  directly  involv- 
ing bills  and  notes  are  to  be  found  in  examining  the  question  of  the 
knowledge  of  a  party  of  the  illegality  of  a  consideration.  But  there 
seems  to  be  no  reason  why  the  well-settled  rules  of  contract  should 
not  be  applied  to  the  case  of  immediate  parties  to  negotiable  instru- 
ments. The  combinations  of  circumstances  to  which  these  rules 
of  contract  apply  are  where  the  consideration  consists  of  some  il- 
legal act,  which  it  is  the  mutual  intention  of  the  parties  to  perform; 
where  it  consists  of  some  act  legal  in  itself,  but  mutually  intended 
to  further  some  illegal  purpose;  where  one  party  intends  an  illegal 
act,  but  the  other  is  innocent  of  any  knowledge  concerning  it;  and, 
lastly,  where  one  party  intends  an  illegal  act  and  the  other  party 
knows  of  it,  but  is  innocent  of  any  participation  in  it.  In  the  case  of 
the  consideration  consisting  of  some  illegal  act  in  which  both  of  the 
parties  participate,  courts  will  not  enforce  the  instrument,  because 
courts  cannot  enforce  a  violation  of  law.^^^  This  rule  is  broad 
enough  to  cover  the  case  of  a  legal  consideration  intended  to  further 
an  illegal  intent,  because  the  parties  may  not  use  a  legal  act  to  cover 
a  wrong,  provided  that  their  intention  to  commit  a  wrong  was  mu- 
tual,-^'' and  the  loan  of  money  evidenced  by  the  bill  or  note  was  in 
furtherance  of  the  parties'  unlawful  purpose.^*^  But,  on  the  other 
hand,  if  the  contract  was  innocent  in  itself,  and  if  the  party  enforc- 
ing the  bill  or  note  was  ignorant  of  the  illegal  intention  of  the  other 
party,  he  is  entitled  to  its  full  benefits,^*^  and  the  courts  will  not 
shield  the  other  party,  because  he  alone  has  attempted  to  further 
some  illegal  purpose  of  his  own.  But  the  purpose  and  consideration  of 
the  instrument  must  be  innocent  and  legal,  for  if  illegal,  although 

239  McKinnell  v.  Robinson,  3  Mees.  &  W.  434;  Cutler  v.  Welch,  43  N.  H. 
497;    Mordecai  v.  Dawkins,  9  Rich.  Law,  262. 

240  Blent  V.  Proctor,  5  Blackf.  2G5;   Cannan  v.  Bryce,  3  Barn.  &  Aid.  179. 

241  Ernst  V.  Crosby,  140  N.  Y.  364,  35  N.  E.  603;  Tyler  v.  Carlisle,  79  Me. 
210,  9  Atl.  356;  Ruckman  v.  Bryan,  3  Denio,  340;  Cutler  v.  Welch,  43  N.  H. 
497;    Wright  v.  Crabbs,  78  Ind.  487. 

242  Pixley  V.  Boyuton,  79  111.  351;    Quu-k  v.  Thomas,  6  Mich.  76. 


278  DEFENSES.  fCh.  7 

its  illegality  was  unknown  to  the  prosecuting  party,  it  is  unenforce- 
able, for  the  courts,  from  their  very  constitution,  cannot  enforce  ne- 
gotiable instruments  upon  an  illegal  consideration,  and  the  igno- 
rance of  the  party  himself  of  the  fact  that  that  consideration  was  in 
violation  of  the  law  does  not  excuse  him.^*^  Where,  however,  the  in- 
strument is  founded  upon  a  consideration  legal  in  itself,  but  intended 
by  one  party  to  further  an  illegal  purpose,  and  the  other  party  knows 
of  it,  but  takes  no  part  in  this  illegal  purpose,  the  law  is  much  more 
difficult  of  interpretation.  It  is  the  opinion  of  writers  ^**  and 
courts  ^*°  of  great  authority  that  no  recovery  can  be  had  by  a  party 
whose  rights  are  thus  tainted  with  his  knowledge  of  its  illegal  pur- 
pose. But  with  all  deference  to  the  opinions  of  such  distinguished 
jurists  it  is  submitted  that  they  are  not  founded  upon  the  better 
reason.  This  would  seem  to  be  that  as  long  as  the  transaction  is 
a  fair  and  honest  one  between  the  two  parties  before  the  court,  and 
one  which  they  had  a  perfect  right  to  enter  into,  the  subsequent  il- 
legal acts  of  one  of  them  should  not  invalidate  the  contract,  as  to 
the  other,  although  that  other  knew  of  them,  unless  he,  too,  directly 
or  indirectly,  participated  in  them.  Wrongful  intent  is  not  punish- 
able by-law  when  nothing  is  done  to  carry  that  intent  into  effect, 
and  much  less  bare  knowledge  of  such  an  intent,  without  any  par- 
ticipation in  it.  The  subsequent  acts  of  the  other  party  are  some- 
thing with  which  he  has  no  concern.^***  And  the  true  rule  would 
seem  to  be  that  unless  there  was  evidence  of  some  act  of  the  party 
prosecuting  the  instrument  showing  that  he  was  a  particeps  crim- 
inis  to  the  illegal  acts  of  the  other,  the  bare  knowledge  of  the  holder 
of  the  other's  intention  to  perpetrate  some  illegal  act  would  not  be 
a  defense  to  the  instrument  as  against  him. 

Same — As  against  Bona  Fide  Holder. 

A  consideration  illegal  because  it  is  evil  or  immoral  or  against 
public  policy  is  not  a  ground  of  defense  to  an  action  brought  by  a 

24  3  Pol.  Cont.  322;    Anson,  Cont.  192;   Favor  v.  Philbrick,  7  N.  H.  326. 

244  Daniel,  Neg.  Inst.  §  200. 

245  Hubbell  v.  Flint,  13  Gray,  277;  Hanauer  v.  Doane,  12  Wall.  342;  Tatum 
V.  Kelley,  25  Ark.  209. 

246  Kreiss  v.  Seligman,  8  Barb.  439;  Tracy  v.  Talmage,  14  N.  Y.  162;  Faik- 
ney  v.  Reynous,  4  Burrows,  2069;  Holnian  v.  Johnson,  Cowp.  341;  Pellecat  v. 
Angell,  2  Cromp.,  M.  &  R.  311. 


Ch.  7]  REAL    AND    PERSONAL    DEFENSES.  279 

purchaser  of  the  instrument  for  value  and  without  notice.  The 
reasons  we  have  already  given  in  this  section  as  those  which 
have  governed  courts  in  dealing  Avith  considerations  made  illegal  by 
statute  prevail  in  these  cases  also.  It  is  therefore  needless  to  re- 
peat them.-** 

118.  DISCHARGE  OF  THE  INSTRUMENT  AND  OF 
THE  PARTIES  THERETO — A  negotiable  instrument  may- 
be discharged  either  by  its  payment  or  by  operation  of 
law  or  agreement  of  the  parties.  The  contract  of  the 
dra-wer  or  indorser  may  be  discharged  by  any  act  of  the 
holder  which  impairs  his  rights  against  other  parties  liable 
to  him  upon  the  instrument. 

119.  Payment  of  an  instrument  is  not  a  defense  to  an 
action  brought  by  its  bona  fide  holder  unless  made  by 
the  acceptor  or  maker  to  the  legal  holder  at  or  after  ma- 
turity. 

120.  The  rules  regulating  the  title  to  an  instrument  of 
its  purchaser  for  value  without  notice  do  not  usually 
apply  to  discharges  of  the  instrument  by  operation  of  law 
or  by  agreement  of  the  parties. 

121.  Where  the  holder  of  a  negotiable  instrument  does 
any  act  which  will  impair  any  right  of  the  drawer  or  of 
any  indorser  against  other  parties  to  the  instrument  liable 
to  him,  it  operates  as  a  discharge  of  the  obligation  of  the 
drawer  or  indorser.  This  does  not  apply  if,  subsequent 
to  such  discharge,  a  purchaser  for  value  without  notice 
before  maturity  acquires  the  instrument. 

'^Discharge"  of  an  instrument  means  that  all  rights  of  action  upon 
it  are  extinguished.  It  is  usually  effected  either  by  payment,  opera- 
tion of  law  or  agreement  of  the  parties,  or,  in  case  of  indorsement, 

248  Tied.  Com.  Paper,  §  178;  Rand.  Ck)m.  Paper,  §  1SS7;  Daniel,  Neg.  Inst 
§  19S;    Edw.  Bills  &  N.  §  516. 


280  DEFENSES.  [Ch,  7 

by  some  act  of  the  holder  impairing  the  rights  of  the  indorser  against 
parties  liable  to  him.  The  instrument,  when  the  discharge  is 
operative,  is  no  longer  negotiable,  and  even  when  transferred  to  a 
purchaser  for  value  cannot  be  enforced,  because  it  is  itself  merely  a 
right  to  demand  money,  which,  upon  the  instrument's  being  dis- 
charged, no  longer  exists.  In  the  classification  and  rules  herein- 
after set  forth,  it  is  sought,  in  the  first  place,  to  show  when  payment 
is  operative  as  a  discharge  against  all  parties,  and  when  a  mere  de- 
fense over  which  the  equities  of  the  bona  fide  holder  prevail,  and 
then  to  mention  briefly  the  various  other  kinds  of  discharges,  glanc- 
ing at  their  principal  characteristics. 
Payment. 

Payment  is  the  first  and  most  common  method  of  discharge.  The 
subject  of  payment  as  a  discharge  is  classified  as  follows : 

(a)  Money  given  for  the  instrument  may  be  either  for  its  payment 
or  its  purchase.  If  for  its  payment,  it  discharges  it;  if  for  its  pur- 
chase, it  transfers  it,  leaving  the  instrument  valid. 

(b)  A  full  payment  at  or  after  maturity  upon  a  bill  by  the  acceptor 
or  upon  a  note  by  the  maker  is  presumed  to  be  a  discharge  of  it. 
Such  a  payment  by  an  indorser  thereon  or  by  the  drawer  thereof  is 
presumed  to  be  a  discharge  of  his  own  and  subsequent  parties'  rights 
and  liabilities,  but  a  purchase  as  to  prior  parties. 

(c)  Payment  of  the  instrument  may  be  made  by  any  of  its  parties 
to  the  legal  holder  thereof  or  to  any  person  authorized  by  him  to 
receive  the  same.-*^ 

(d)  Payment  must  be  made  at  or  after  the  maturity  of  the  instru- 
ment to  discharge  it  as  to  the  purchaser  for  value  without  notice. 

The  best  test  to  determine  whether  money  given  for  an  instrument 
is  given  for  its  paj'ment  or  for  its  purchase  is  the  mutual  intention 
of  the  parties,  expressed  by  their  words  or  acts  at  the  time  of  the 
transaction.  These,  if  undisputed,  are  a  final  test  of  the  character 
of  the  transaction,  but,  if  disputed  or  doubtful,  their  meaning  and 
determination  become  facts  for  the  jury  to  decide  before  the  court 

249  In  Wbeeler  v.  Guild,  20  Pick.  (Mass.)  545,  tlie  rule  was  laid  down  that 
where  at  maturity  one  who  is  liable  on  a  note  pays  it  to  a  party  who  has 
the  legal  title  thereto,  by  indorsement  and  possession,  and  without  notice  on 
the  part  of  the  payor  that  there  is  a  defect  in  the  holder's  title,  the  pay- 
ment is  good. 


Ch.   7]  REAL    AND    PERSONAL   DEFENSES.  281 

can  declare  whether  the  instrument  is  discharged  or  not.*""  If  the 
transaction  consists  merely  of  the  surrender  of  the  instrument  upon 
the  payment  of  a  sum  of  money  equaling  the  amount  due,  the  first 
presumption  to  be  attached  to  the  transaction  alone  is  that  it  is  a 
payment.  The  reason  for  this  is  that  a  purchase  and  sale  is  a  con- 
tract to  be  created  by  overt  acts  or  words  manifesting  the  mutual 
intention  of  the  parties  to  buy  and  sell,  while  a  payment  is  not  a 
contract  resting  upon  mutual  agreement,  but  is  a  discharge  of  a  con- 
tract. Hence,  there  being  no  agreement,  the  transaction,  standing 
by  itself,  cannot  be  treated  as  a  contract,  but,  to  have  significance, 
must.be  deemed  an  extinguishment  of  the  instrument.^ ^^  The 
courts,  in  construing  the  relations  of  the  parties  created  by  such 
a  tranlaction,  do  not  take  into  consideration  only  the  fact  of  the 
presence  or  absence  of  an  express  agreement.  They  also  consider 
the  rights  and  obligations  of  the  parties  upon  the  instrument  itself. 
The  presumption  to  be  drawn  from  the  acceptance  upon  the  instru- 
ment is  that  the  acceptor  has  funds  of  the  drawer  wherewith  to  pay 
the  bill  when  due,  and  its  payment  at  or  after  maturity  by  the 
acceptor  would  be  merely  the  execution  of  such  agency,  which  would 
annul  any  obligations  or  rights  of  the  holder  against  the  drawer 
whose  funds  presumptively  are  used  to  pay  the  bill,  or  against  the 
indorsers  who  guaranty  that  the  acceptor  or  drawer  will  pay  it.^^^ 
Payment  by  a  maker  or  a  co-maker  has  a  similar  effect.  Such  person 
is  primarily  liable  for  the  whole  of  the  note,  and  his  intention  on 
giving  money  for  it  at  or  after  its  maturity  must  be  deemed  in  law  to 
be,  to  meet  his  obligation,  and  protect  those  who,  as  indorsers,  have 
assured  purchasers  of  the  paper  of  its  payment.^ ^^  The  drawer  and 
indorsers  stand  upon  a  different  footing.      They  each  are  liable  to 

2  50  Kyne  V.  Erskine,  7  Mo.  App.  591;  Dougherty  v.  Deeney,  45  Iowa,  443; 
Swope  V.  Lefflngwell,  72  Mo.  348. 

251  Lancey  v.  Clark,  64  N.  Y.  209;  Burr  v.  Smith,  21  Barb.  262;  Eastman 
V,  Phmier,  32  N.  H.  238;    Greening  v.  Patten,  51  Wis.  150,  8  N.  W.  107. 

252  Suydam  v.  Westfall,  2  Denio,  205;  Gordon  v.  Wansey,  21  Gal.  77;  Gard- 
ner V.  Maynard,  7  Allen,  456.  On  this,  see  Swope  v.  Ross,  40  Pa.  St.  186, 
which  holds  that,  since  the  acceptor  of  a  bill  is  really  the  debtor,  the  drawer 
and  indorser  being  merely  sureties,  the  debt  is  extinguished  by  its  payment  by 
the  acceptor;  and,  save  where  the  acceptance  was  supra  protest,  no  right  of 
action  remains  against  such  drawer  or  indorser. 

253  Ballard  v.  Greenbush,  24  Me.  330;    Beaumont  v.  Greathead,  2  C.  B.  494. 


282  DEFENSES.  [Ch.  7 

subsequent  parties,  but  prior  parties  are  liable  to  them.  Their  pay- 
ment, therefore,  must  be  deemed  to  extinguish  their  own  liability,  and 
with  it  both  the  successive  liabilities  of  all  subsequent  parties  to  each 
other  and  also  their  right  against  the  parly  paying.  This  legal  result 
of  their  act  they  may  be  presumed  to  have  intended  by  the  payment 
of  the  instrument,  but  nothing  more.  It  cannot  be  supposed  to 
have  meant  to  release  prior  parties,  from  whom  the  payor  in  turn 
could  collect  the  instrument,  or,  in  other  words,  to  satisfy  and  dis- 
charge the  instrument  itself.  Hence  the  rule  is  that  money  given 
for  an  instrument  by  a  drawer  or  an  indorser  does  not  discharge 
the  instrument,  but  constitutes  him  the  legal  holder  of  it.^*^*  ♦Thus 
as  to  prior  parties  it  is  a  transfer,  and  not  a  discharge.  And  in  con- 
sidering the  transactions  of  the  various  parties  to  the  instrument 
the  rule  to  note  is  that  payment  of  the  instrument,  to  operate  as  a 
discharge,  must  be  intended  as  a  payment,  and  must  be  made  by  the 
acceptor  or  maker  at  or  after  maturity,  otherwise  it  is  presumptively 
a  transfer.  From  these  reasons  naturally  follows  the  rule  that  any 
of  the  parties  to  the  instrument  may  make  payment  and  thus  extin- 
guish their  own  obligations.^"" 

It  is  well,  perhaps,  to  append  to  this  statement  a  few  scattered 
principles  usually  added  by  the  text  writers  to  their  remarks  upon 
this  branch  of  the  subject.  It  is  advisable  for  any  party  making 
payment  to  assure  himself  that  there  has  been  due  presentment, 
protest,  and  notice,  because  in  default  of  these  he  could  not  recover 
against  the  antecedent  indorsers  or  the  drawer  under  liability  to 
him.  It  is  also  advisable  for  him  to  look  to  the  identity  of  the 
holder,  and  that  he  traces  a  legal  title  to  the  instrument.  And  lastly 
that  he  take  the  instrument  itself  into  his  possession,  because  that 
is  prima  facie  evidence  of  payment,  and  also  that  he  strengthen  this 
evidence  by  taking  a  separate  voucher  as  a  receipt. '^^^     This  last 

2  54  As  to  indorser,  West  Boston  Sav.  Bank  v.  Ttiompson,  124  Mass.  50G; 
Howe  Mach.  Co.  v.  Hadden,  8  Biss.  208,  Fed.  Cas.  No.  0,785;  Hayling  v. 
Mullhall,  2  W.  Bl.  1235;  Morgan  v.  Reintzcl,  7  Crancb.  273.  As  to  drawer, 
Callow  V.  Lawrence,  3  Maule  &  S.  95;  Benj.  Chalm.  art.  234;  Story,  Bills, 
§  422:   Rand.  Com.  Paper,  §  427. 

255  Tied.  Com.  Paper,  §  372;  Daniel,  Neg.  Inst.  §  223;  Edw.  Neg.  Inst.  §& 
721-729;   Rand.  Com.  Paper,  c.  39,  §  2. 

266  Daniel,  Neg.  Inst.  c.  38,  §  2;   Tied.  Com.  Paper,  c.  19,  §§  372,  373. 


Ch.    7]  REAL    AND    PERSONAL    DEFENSES.  28'6 

ooni'Pe  is  especially  desirable  in  case  of  an  indorser  making  payment, 
because,  in  his  action  against  prior  parties,  possession  of  the  instru- 
ment is  in  some  eases  not  sufficient  evidence  of  its  payment  by  him, 
and  it  is  necessary  for  him  to  show  the  fact  of  payment  by  himself 
affirmatively.  For  this  purpose  a  receipt,  while  not  conclusive,  is 
yet  very  strong  proof. -^^  The  person  to  whom  payment  must  be 
made  is  the  legal  holder  or  his  duly-authorized  agent.  This  legal 
ownership  depends  upon  two  principles!.  If  the  instrument  is  pay- 
able to  bearer  or  indorsed  in  blank,  its  possession  is  presumptive 
evidence  of  right  to  collect  it.^^^  But  if  it  is  made  payable  to  order 
or  indorsed  to  order,  the  order  of  the  payee  is  necessary  to  confer 
title  and  right  to  collect,  and  mere  possession  is  not  presumptive 
evidence  of  title.^*^"  In  such  cases,  where  it  is  lawfully  in  the  holder's 
possession,  there  must  be  shown,  in  addition,  some  evidence  of  agency 
or  legal  right  to  receive  the  money,  as  that  the  holder  is  the  assignee 
of  a  bankrupt,  or  the  representative  of  the  dead  owner,  or  the 
guardian  of  an  infant.^®"  The  reasons  for  these  several  positions 
have  already  been  given. 

These  general  principles  lead  to  an  understanding  of  the  com- 
parative rights  of  the  party  paying  the  instrument  and  those  of  the 
bona  fide  holder,  when  weighed  with  each  other.  On  the  one  hand, 
the  former  has  paid  the  instrument  once,  and  has  a  right  to  say  that 
he  has  performed  his  promise  and  satisfied  his  obligations;  on  the 
other,  the  bona  fide  holder,  if  he  has  received  it  before  it  is  due, 
has  taken  the  paper  with  nothing  to  awaken  his  suspicion  concern- 
ing it,  and,  from  the  terms  of  the  instrument,  is  warranted  in  sup- 
posing that  the  acceptor  or  maker  will  pay  the  instrument  when  due, 
because  he  has  promised  to  do  so.  It  is  the  acceptor  or  maker 
who  fails  in  the  performance  of  the  letter  of  his  contract,  and  not 
the  bona  fide  holder.     And  therefore  the  equity  of  the  bona  fide 

207  Mendez  v.  CaiTeroon,  1  Ld.  Raym.  742. 

258  Mauran  v.  Lamb,  7  Cow.  174;  Merritt  v.  Cole,  14  Hun,  324;  Bachellor 
V.  Priest.  12  Pick.  40fi;    Bank  of  U.  S.  v.  U.  S.,  2  How.  711. 

259Doubleday  v.  Kress,  50  N.  Y.  410;  Porter  v.  Cnshman,  19  111.  572; 
Pease  v.  "Warren.  29  Mich.  9. 

26oBayley,  Bills  (2d  Am.  Ed.)  320;  2  Pars.  Notes  &■  B.  211;  Daniel,  Neg, 
Inst.  §  1230;   Tied.  Com.  Paper,  §  374. 


284  DEFENSES.  [Ch.  7 

holder  is  superior  to  that  of  the  party  making  the  payment^"'  The 
payment  on  the  part  of  the  paj'or  might  be  loolied  on  by  the  pur- 
chaser as  a  discount, — a  proceeding  in  which  the  bona  fide  holder 
has  no  interest,  and  concerning  which,  before  maturity,  he  is  not 
bound  to  inquire.  If  the  holder  at  the  time  of  payment  consented 
to  receive  payment,  the  payor  should  either  have  demanded  the  re- 
turn of  the  instrument  to  which  he  was  entitled,  or  else  should  have 
insisted  upon  its  destruction,  or  the  writing  upon  it  of  some  mem- 
orandum showing  unequivocally  that  it  was  canceled.^*^  And  if 
he  failed  to  assert  his  legal  rights,  or  to  take  proper  precautions,  he, 
and  not  the  bona  fide  holder,  should  suffer.  Where  a  payment  upon 
the  instrument  is  made  to  one  not  the  legal  holder,  a  parallel  course 
of  reasoning  is  followed.^**  Such  a  payment  is  made  to  one  who 
had  no  legal  right  to  receive  it.  It  is  therefore  no  discharge  of  the 
obligation.  The  paj'or  has  made  a  mistake  in  law,  and  his  mis- 
take and  ignorance  of  the  law  can  be  no  excuse  to  him.  And  lastly, 
if  the  drawer  or  indorser  makes  the  payment  before  maturity,  it  is 
not  an  extinguishment  of  the  instrument  at  all.  It  can  be  at  most 
merely  a  satisfaction  of  his  individual  liability  upon  it,  and  that 
of  parties  subsequent  to  him.  It  is  well  settled,  moreover,  that  an 
indorser  may  take  up  and  reissue  a  bill  or  note  with  or  without  his 
indorsement,^""  as  may  also  a  drawer,  except  in  cases  of  an  ac- 

262  Burbridge  v.  Manners,  3  Camp.  193.  It  was  held  In  this  case  that, 
although  a  bill  cannot  be  reissued  after  it  has  arrived  at  maturity  and  been 
paid,  yet  if  paid,  and  afterwards  indorsed  before  it  becomes  due.  It  is  a 
valid  security  in  the  hands  of  a  bona  fide  indorsee.  In  the  case  of  Morley 
v.  Culverwell,  7  Mees.  &  W.  174,  it  was  shown  that  the  drawer  of  a  bill  of 
exchange,  before  it  became  due,  agreed  with  the  acceptor  that,  on  his  giving 
a  certain  mortgage  security  for  the  amount,  he,  the  drawer,  accordingly  ex- 
ecuted the  mortgage  and  received  back  the  bill  uncanceled.  It  was  held  that 
the  drawer  was  liable  on  the  bill  to  a  party  to  whom  the  acceptor  afterwards 
paid  it  for  value  before  it  came  due.  A  plea  that  the  bill  was  paid  by  the 
acceptor  before  it  came  due,  and  afterwards  reissued  by  him  without  a  new 
stamp,  can  be  supported  only  by  proof  of  actual  payment  in  cash,  and  not 
by  evidence  of  an  arrangement  between  the  drawer  and  acceptor,  whereby 
the  bill  was  treated  as  being  satisfied. 

283  District  of  Columbia  v.  Cornell,  130  U.  S.  659,  9  Sup,  Ct.  694. 

264  Harpending  v.  Gray,  76  Hun,  351,  27  N.  Y.  Supp.  7(52. 

266  St  John  V.  Roberts,  31  N.  Y.  441;  French  v.  Jarvis,  29  Conn.  348; 
Kirksey  v.  Bates,  1  Ala.  303. 


Ch.   7]  REAL    AND    PERSONAL    DEFENSES.  285- 

ceptance  for  his  own  accommodation,  or  of  his  liability  to  an  in- 
dorser.^""  In  case  of  such  payment  and  reissue  before  maturity,  the 
bona  fide  holder,  upon  acquiring  the  instrument,  may  well  rely  upon 
this  settled  rule  of  law  in  defending  his  title  to  the  instrument. 
And  so  far  as  he  is  concerned,  it  is  a  just  and  wise  rule  that  pay- 
ment of  an  instrument  is  inoperative  as  a  defense  except  when 
made  by  the  acceptor  or  maker  to  the  legal  holder  at  or  after  ma- 
turity. If  a  person  acquires  title  to  an  unpaid  instrument  after 
maturity  from  the  holder,  or  if  he  acquires  it  before  maturity  from  a 
person  other  than  the  holder,  or  his  agent,  he  is  by  virtue  of  these 
facts  put  upon  notice,  and  not  a  bona  fide  holder.^"  if  he  acquires 
the  instrument  from  the  drawer  or  indorser  after  maturity,  he  be- 
comes a  party  to  a  new  contract,  not  based  upon  the  instrument, 
but  one  by  which  the  vendor  agrees  to  pay  to  him  the  amount  of 
the  instrument  if  it  be  not  paid  by  the  maker  or  acceptor  within  a 
reasonable  time.^®^  But  in  such  a  transfer  also  the  holder  buys  only 
the  rights  of  his  transferrer,  and  is  not  strictly  a  bona  fide  holder.^"* 
It  is  only  when  his  transferrer  is  a  bona  fide  holder,  and  can  convey 
a  title  free  from  equities,  that  his  successor  steps  into  his  rights 
by  virtue  of  the  assignment. 

266  Callow  v.  Lawrence.  3  Maule  &  S.  95.  In  this  case,  the  drawer  of  a 
bill  payable  to  his  own  order,  and  indorsed  by  him  to  T.,  and  by  T.  to  B., 
upon  the  bill  being  dishonored,  paid  the  amount  to  B.,  who  struck  out  his 
own  and  T.'s  indorsement,  and  returned  it  to  the  drawer,  and  the  d;awer 
afterwards  passed  it  to  the  plaintiff.  It  was  held  that  the  plaintiff  might 
recover  against  the  acceptor. 

267  See  supra,  pp.  199-205.  Wliere  one  is  an  indorsee  for  value  of  a  bill 
before  its  maturity,  and  not  kuowing  that  it  is  accommodation  paper,  he 
may  treat  all  parties  thereto  as  liable  in  their  turn,  aud  no  subsequent  knowl- 
edge that  the  bill  is  for  accommodation  will  alter  this  right.  If  the  holder 
release  the  drawer,  the  ultimate  liability  of  the  acceptor  Is  not  thereby  af- 
fected.    Farmers'  &  M.  Bank  v.  Rathbone,  26  Vt.  19. 

268  Leavitt  v.  Putnam,  1  Sandf.  199;  Brown  v.  Davies,  3  Term  R.  SO.  It 
was  held  in  this  case  that  where  a  promissory  note  has  been  indorsed  to  the 
plaintifC  after  it  became  due,  who  sues  the  maker  upon  it.  the  latter  Is  enti- 
tled to  go  into  evidence  to  show  that  the  note  was  paid  as  between  him  and 
the  original  payee.  "Generally,  when  a  note  is  due,  the  party  receiving  it 
takes  it  on  the  credit  of  the  person  who  gives  it  to  him"  (per  Butler,  J.). 

269  See  supra,  pp.  199-205. 


286  DEFENSES.  [Ch.  7 

By  Operation  of  Law  or  Agreement  of  the  Parties. 

The  two  remaining  classes  to  be  briefly  mentioned  are  discharges 
by  operation  of  law  and  discharges  by  agreement  of  the  parties. 
Of  the  former  class,  the  instances  cited  by  the  authorities  are  where, 
by  some  insolvent  act  of  the  state  or  country,  the  party  is  discharged 
from  his  obligation,  where  the  instrument  is  merged  in  the  higher 
form  of  contract  of  a  judgment  taken  upon  it,  where  the  holder  of 
the  instrument  makes  a  bequest  or  gift  of  it  to  the  acceptor  or  maker, 
and,  in  states  or  countries  where  the  common-law  rule  prevails, 
when  the  holder  appoints  the  acceptor  or  maker  his  executor,  though 
this  common-law  rule  is  very  generally  abolished  by  statute.  Of 
the  latter  class,  the  instances  cited  are  an  accord  and  satisfaction, 
a  general  release  from  the  holder  to  the  maker  or  acceptor,  and 
lastly  an  agreement  between  the  holder  and  the  acceptor  or  maker 
either  that  another  shall  be  substituted  as  the  debtor  upon  the  in- 
strument, or  that  another  security  or  a  higher  security  shall  be 
taken  in  lieu  of  the  bill  or  note.^^°  It  will  be  seen  in  all  of  these 
instances,  except  those  where  the  rights  are  destroyed  by  statute, 
that  the  holder  voluntarily  surrenders  his  rights.  If  the  instrument 
is  subsequently  acquired  before  maturity  by  a  purchaser  for  value, 
these  discharges  do  not  alter  his  rights.  But  if  the  instrument  re- 
main the  property  of  the  holder  the  questions  of  the  comparative 
rights  of  the  holder  and  those  of  the  other  parties  are  eliminated 
from  consideration.  The  questions  invoh'ed  become  those  of  or- 
dinary contract  law,  and  not  of  the  special  form  of  contract  of  the 
negotiable  instruments.  SufQce  it  to  say,  therefore,  that  discharges 
by  operation  of  law  and  by  agreement  of  the  parties  are  not  defenses 
to  the  action  on  the  instrument,  if  again  transferred,  but  if  the  in- 
strument remains  with  the  holder  they  are  defenses,  because,  by  the 

270  The  holder  of  bills  accepted  for  accommodation  of  B.,  the  drawer, 
after  they  became  duo,  entered  into  an  agreement  with  B.  that,  in  considera- 
tion of  B.  giving  him  a  freehold  mortgage  for  these  bills  and  other  debts,  he 
would  deliver  up  the  bills  to  be  canceled,  and  give  up  his  claim  on  all  par- 
ties. The  mortgage  security  was  given  accordingly.  At  the  time  of  the 
agreement  the  holder  knew  that  the  acceptances  were  accommodation  ac- 
ceptances. In  an  action  by  the  holder  against  the  acceptor,  it  was  held  that 
the  acceptor  was  discharged,  and  had  a  defense  on  equitable  grounds.  Ewin 
V.  Lancaster,  6  Best  &  S.  571. 


€h.   7]  REAL   AND    PERSONAL   DEFENSES.  287 

rules  of  ordinary  contracts,  the  holder  has  himself  surrendered  his 
right  to  the  party  whom  he  is  prosecuting. 
Discharge  of  Drawer  and  Indorsers  as  Sureties. 

In  addition  to  the  methods  of  discharge  extinguishing  the  instru- 
ment itself  as  an  obligation  must  be  mentioned  the  methods  of  dis- 
charge extinguishing  the  several  contracts  of  the  drawer  and  in- 
dorsers in  their  character  of  a  surety  thereupon  by  operation  of  the 
general  rule  of  suretyship  applied  to  the  law  of  negotiable  bills  and 
notes.  The  principle  underlying  this  method  is  that  if  the  holder 
of  a  bill  or  note  does  any  act  which  will  impair  any  right  of  the 
drawer  or  indorsers  against  other  parties  to  the  instrument  liable  to 
him,  the  drawer  or  indorser  will  be  discharged.  The  reason  for 
this  rule  is  the  promise  implied  in  law,  that,  if  either  the  drawer  or 
indorser  pays  the  instrument,  parties  liable  to  him  will  reimburse 
him  for  such  paj^ment,  and  that  to  effect  such  end  upon  payment  the 
drawer  or  indorser  is  entitled  to  demand  its  possession  from  the 
creditor,  and  to  be  subrogated  to  all  remedies  possessed  by  him 
against  the  prior  parties  thereon,  unimpaired  by  any  act  of  such 
creditor, — a  promise  which  the  creditor  also  impliedly  ratifies  in 
making  his  contract  with  the  indorser.-'^^  If  the  creditor  violates 
any  part  of  this  contract,  this  violation  releases  the  indorser.  From 
this  principle  flow  several  principles  which  are  of  very  common  ap- 
plication.    They  are  as  follpws: 

(1)  Whatever  discharges  the  acceptor  or  maker  discharges  the 
drawer  or  indorsers,  because  the  ultimate  remedies  of  the  drawer 
or  indorsers  are  against  these  parties,  and  releasing  them  extin- 
guishes the  obligation  which  in  turn  they,  as  sureties,  undertook 
should  be  performed.^'' ^ 

(2)  Any  act  of  the  holder  which  discharges  a  prior  indorser  dis- 
charges subsequent  ones,  because  such  prior  indorser  guarantied 
subsequent  indorsers  that  he  would  pay  if  the  maker  or  acceptor 
did  not.  As  far  as  they  were  concerned,  he  stood  in  the  position 
of  a  principal  upon  the  contract,  and  the  release  of  their  principal 

271  Shutts  V.  Fingar,  100  N.  Y.  539,  3  N.  B.  588;  Goodyear  v.  Watson.  14 
Barb.  481;    Clason  v.  Morris,  10  Johns.  524. 

2T2  Sargent  v.  Appleton,  6  ]\Iass.  So;  Couch  v.  Waring,  9  Conn.  2G1;  Gun- 
nis  V.  Weigley,  114  Pa.  St.  194,  G  Atl.  405. 


288  DEFENSES.  [Ch.  7 

also  releases  them.  A  discharge  of  a  prior  indorser  therefore  is  like 
a  discharge  of  the  maker  or  acceptor,  and  the  holder  violates  this 
contract  with  them.-'^ 

(3)  If  the  holder  releases  securities  held  b}'  him  as  collateral  to 
claims  against  parties  against  whom  the  indorser  would  have  re- 
course, it  releases  the  indorser.  This  is  because  the  surety,  upon 
payment  of  the  claim  against  his  principal,  has  a  right  to  be  put 
in  the  place  of  the  creditor.  He  has  a  right  to  enforce  every  means 
of  payment  against  the  principal  debtor  the  creditor  had.  These 
securities  were  a  means  of  such  enforcement,  and  he  has  a  right  to 
them.  Every  remedy  the  creditor  had,  upon  payment  by  the  surety, 
belong  to  him.  And  if  the  creditor  impairs  the  rights  of  the  surety 
in  this  respect,  he  breaks  his  contract  with  him  and  releases  him.'^^* 

(4)  Where  the  holder  of  the  instrument  upon  a  valid  consideration 
makes  a  definite  promise  to  extend  the  time  or  forbear  suit  against 
a  party  liable  to  a  drawer  or  indorser,  this  discharges  the  drawer 
or  indorser.  The  reasons  for  this  rule  are  that  it  creates  a  contract 
different  from  the  one  the  surety  guarantied,  and  that  it  prevents 
the  surety  from  protecting  himself  by  paying  forthwith  the  princi- 
pal's debt  and  immediately  bringing  suit  against  him.^^°      But  it 

273  Newcomb  v.  Raynor,  21  Wend.  lOS.  In  this  case  it  was  held  by  Nel- 
son, C.  J.,  that,  "as  between  the  first  and  subsequent  indorsers.  the  former 
must  be  regarded  in  the  light  of  principal.  He  stands  behind  them  upon  the 
paper,  and  is  bound  to  take  it  up,  in  case  of  default  of  the  maker.  A  dis- 
charge of  him,  therefore,  by  the  holder  (regarding  the  relative  position  of  the 
parties),  on  general  principles,  operates  to  release  them."  Shutts  v.  Fingar, 
100  N.  Y.  539,  3  N.  E.  588. 

274  Goodyear  v.  Watson,  14  Barb.  481;  Clason  v.  Morris,  10  Johns.  539; 
Craythorne  v.  Swinburne,  14  Ves.  1G9;   Mathews  v.  Aikin,  1  N.  Y.  595. 

275Siebeneck  v.  Anchor  Sav.  Bank,  111  Pa.  St.  187,  2  Atl.  485;  Batavian 
Bankv.  McDonald,  77  Wis.  480,46  N.  W.  902;  Stevens  v.  Oaks,  58  Mich.  343, 
25  N.  W.  309.  In  the  case  of  Okie  v.  Spencer,  2  Whart.  253,  the  holder  of  a 
note  took  a  check  from  the  maker,  dated  six  days  subsequent  to  the  maturity 
of  the  note,  and  with  the  understanding  that  the  check  was  to  be  in  full 
satisfaction  of  such  note,  if  paid.  It  was  held  that  this  constituted  an  ex- 
tension to  the  maker,  and  discharged  an  indorser.  In  the  case  of  Tiernan 
V.  Woodi-uff,  5  McLean,  350,  Fed.  Cas.  No.  14,028,  a  bankrupt  obtained  for  a 
valuable  consideration,  from  a  creditor,  two  months'  time,  during  which  the 
creditor's  right  to  bring  suit  was  suspended.  It  was  claimed  by  the  in- 
dorser that  this  operated  to  discharge  him  from  his  indorsement,  but  It  wa> 


Ch.   7]  REAL    AND    PERSONAL    DEFENSES. 


289 


must  be  a  new  contract  which  is  created  and  substituted  for  the 
old  one.      It  must  be  with  the  principal  himself, ^^'^  and  must  have 
a  valid  consideration.- '^^      It  must  be  absolute," »  ^nd  not  indefi-  ' 
nite.-'*^     And  it  must  have  all  other  requisites  necessary  to  create 

held  that  since,  by  the  bankrupt  law,  the  banki-upt  was  clischargecl  of  all 
liability,  and  since  the  sole  remedy  of  the  indorser  lay  in  his  presentation  of 
his  future  liability  against  the  bankrupt's  estate,  his  right  was  not  preju- 
diced by  the  extension  of  time,  and  there  was  no  discharge.  In  Laxton  v. 
Peat,  2  Camp.  1S5,  it  was  held  that  if  the  indorsee  of  a  bill  of  exchange,  hav- 
ing notice  that  it  was  accepted  without  consideration,  receive  part  payment 
from  the  drawer,  and  give  him  time  to  pay  the  residue,  he  thereby  discharges 
the  acceptor.  In  the  case  of  Pannell  v.  M'Mechen.  4  Har.  &  J.  (Md.)  474, 
"the  drawer  and  indorser  of  a  note,  being  unable  to  meet  their  engagements, 
proposed  to  compound  with  their  creditors,  and  executed  a  deed  of  trust 
to  trustees,  of  whom  the  defendant  was  one,  to  be  applied  to  the  payment  of 
debts  in  the  order  directed,  thereby  securing  to  the  defendant  the  payment 
of  the  note  in  question,  on  the  terms  that  such  creditors  as  should  become 
parties  to  the  deed  should  have  an  interest  in  the  property  conveyed.  The 
deed  contained  a  clause  releasing  the  drawer  and  first  indorser,  on  the  ex- 
press terms  that  the  release  should  extend  to  no  other  terms.  The  plaintiff 
and  defendant  assented,  and  signed  the  instrument.  *  *  *  Therefore 
*  *  *  the  court  are  clearly  of  the  opinion  that  the  release  in  this  case 
cannot  discharge  the  defendant."  (Per  Johnson,  J.)  In  Callott  v.  Haigh,  3 
Camp.  281,  it  was  held  that  the  drawer  of  an  accommodation  bill  was  not 
discharged  by  time  being  given  the  acceptor,  and  in  Fentum  v.  Pocock,  5 
Taunt.  192,  it  was  held  that,  if  the  holder  of  a  bill  accepted  for  the  accom- 
modation of  the  drawer  takes  a  cognovit  from  the  drawer  for  payment  by 
installments,  he  does  not  thereby  discharge  the  acceptor,  whether  the  holder 
knew  at  the  time  of  taking  the  bill  that  it  was  an  accommodation  bill  or 
not. 

276  Harbert  v.  Dumont,  3  Port.  (Ind.)  346. 

277  McLemore  v.  Powell,  12  Wheat.  554.  It  was  held  by  Justice  Story. 
in  this  case,  that:  "The  case  then  resolves  itself  into  this  question,— whether 
a  mere  agreement  with  the  drawers  for  a  delay,  without  any  consideration 
for  it,  and  without  any  communication  with,  or  assent  of,  the  indorser,  is  a 
discharge  of  the  latter,  after  he  has  been  fixed  in  his  responsibility  by  the 
refusal  of  the  drawee,  and  due  notice  to  himself,  and  we  are  all  of  opinion 
that  it  does  not.  *  *  *  In  order  to  produce  such  a  result,  the  agreement 
must  be  one  binding  in  law  upon  the  parties,  and  have  sufficient  considem- 
tion  to  support  it."  Davis  v.  Graham,  29  Iowa,  514;  Galbraith  v.  Fullerton, 
53  111.  126. 

27  8  Hansberger  v.  Geiger,  3  Grat.  144. 

27  9  Gardner  v.  Watson,  13  111.  347;    Blackstone  Bank  v.  Hill,  10  Pick.  133; 
NEG. BILLS 19 


290  DEFENSES.  [Ch.   7 

a  contract.  The  surety  must  not  assent  to  it,^^°  and  it  must  be 
without  reservation  as  to  him.^^^  It  is  to  be  added,  by  way  of 
caution,  that  this  rule  must  not  be  understood  to  mean  mere  de- 
lay,^^^  nor  part  payment,^^^  nor  the  receipt  by  the  creditor  of  col- 
lateral security  to  protect  his  claim.'**  For  these  in  no  wise  prej- 
udice the  surety  in  his  position. 

Other  Methods  of  Discharge. 

In  concluding  these  rules,  it  is  proper  to  add  there  are  other 
methods  of  discharge  which  have  already  been  sufficiently  exam- 
ined. They  are  misrepresentation  or  fraud  in  procuring  the  indorse- 
ment, which  is  governed  by  the  principles  of  fraud  already  stated, 
diversion  of  the  instrument,  its  alteration,  its  payment  or  release. 
The  general  rule  is  that  these  and  the  other  methods  of  discharge 
are  not  to  be  understood  as  being  defenses  to  the  action  of  the  pur- 
chaser for  value  without  notice  unless  they  are  his  own  act.  For 
the  acts  of  others  he  is  not  responsible.  Thus,  for  example,  the  in- 
dorser,  as  a  surety,  cannot  set  up  against  the  bona  fide  holder  the 
defense  of  fraud,^^^  nor  diversion.^*'  For  the  general  rule  applies 
to  these  instances,  that  any  defense  not  appearing  on  the  face  of 
the  paper,  and  in  which  he,  as  holder,  has  taken  no  part,  would  not 
operate  as  a  defense  against  him. 

Abel  V.  Alexander,  45  Ind.  523;  People's  Bank  v.  Legrand,  103  Pa.  St.  309; 
Beach  v.  Zimmerman,  106  Ind.  498,  7  N.  E.  237. 

2  80  Gloucester  Bank  v.  Worcester.  10  Pick.  528;  Prouty  v.  Wilson,  123 
Mass.  297;    Smith  v.  Hawkins,  6  Conn.  444. 

281  Muir  V.  Crawford,  L.  R.  2  H.  L.  Sc.  456. 

282  Powell  V.  Waters,  17  Johns.  176;  Sterling  v.  Marietta  &  S.  Trading  Co., 
11  Serg.  &  R.  179;  Freemans  Bank  v.  Rollins,  13  Me.  202;  Sohn  v.  Morton, 
92  Ind.  170. 

2  83  Greenawalt  v.  McDowell.  65  Pa.  St.  404;   Hill  v.  Bostick,  10  Yerg.  410. 

284  Beard  v.  Root,  4  Hun,  357;  Cary  v.  White,  52  N.  Y.  138;  Andrews  v. 
Marrett,  58  Me.  539. 

28 B  Selser  v.  Brock,  3  Ohio  St  302;  Wayne  Agricultural  Co.  v.  Cardwell, 
73  Ind.  555. 

886  See  supra,  p.  173. 


•Ch.  7]  SUMMARY    OF    CHAPTER.  291 


SUMMARY  OF  CHAPTER. 

(1)  The  purchaser  for  value  without  notice  cannot  recover  upon  the  Instru- 
ment against  parties  who  are  infants,  nor,  in  some  jurisdictions,  against  mar- 
ried women,  nor  against  adjudged  incompetents,  because  all  these  parties  had 
no  capacity  to  make  or  indorse  the  iustrament  itself.  Probably  also  insanity 
and  complete  intoxication  are  still  defenses  available  against  the  bona  fide 
holder,  but  ultra  vires  is  not  such  a  defense. 

(2)  The  purchaser  for  value  without  notice  cannot  recover  upon  the  instru- 
ment where  statutory  enactment  expressly  or  impliedly  declares  the  instru- 
ment void. 

(3)  The  purchaser  for  value  without  notice  cannot  recover  upon  the  instru- 
ment where  the  insti-ument  as  held  by  him  does  not  upon  its  face  evidence  the 
agreement  between  the  parties. 

(4)  The  purchaser  for  value  without  notice  can  recover  upon  the  instrument 
and  has  a  title,  in  the  following  cases: 

Where  there  is  no  real  intention  to  issue  or  Indorse  the  Instrument,  such 
as  fraud,  duress,  or  diversions. 

Where  a  defense  of  failure  or  lack  of  consideration  or  illegality  of  considera- 
tion which  does  not  avoid  the  instrument  is  interposed. 

Where  the  instrument  has  been  discharged  by  payment,  or  some  act  which 
ils  not  the  personal  act  of  the  holder. 


292  PUIiClIASEU    FOR    VALUE    WITHOUT    KOTl'JE.  [Cll.   6 

CHAPTEE,  VIII. 

PURCHASER  FOR  VALUE  WITHOUT  NOTICE. 

122.  What  Constitutes. 

123-124.  Value, 

125-127.  Notice. 

128-131.  Presumption  and  Burden  of  Proof— Order  of  Proof. 

WHAT  CONSTITUTES. 

122.  To  constitute  a  purchaser  of  a  negotiable  instru- 
ment a  purchaser  for  value  v^ithout  notice,  the  purchase 
must  be: 

(a)  For  a  valuable  consideration. 

(b)  Without  notice  of  facts  which  impeach  its  validity 

between  antecedent  parties. 

It  remains  in  this  chapter  to  examine  consideration  and  no- 
tice, the  two  other  elements  of  bona  fide  title  yet  undiscussed. 
Tlie  purchaser,  in  order  to  entitle  him  to  the  immunities  of  nego- 
tiability, must  be  both  a  holder  for  value,  and  also  a  holder  without 
notice.^  Both  of  these  factors  must  concur  in  his  holding.  A  pur- 
chaser for  value  may  or  may  not  be  a  purchaser  without  notice.  A 
purchaser  without  notice  irrespective  of  the  rights  he  may  acquire 
upon  transfer,  cannot  overcome  equities  if  he  has  paid  no  value. 
In  the  former  case  it  makes  little  difference  that  the  holder  took  the 
instrument  and  paid  its  face  for  it;  in  the  latter,  that  he  took  the 
instrument  in  the  truest  faith.^  Therefore,  to  the  branches  of  the 
subject  of  the  purchaser  for  value  without  notice  already  given,  we 

1  See  the  opinion  of  Holroyd,  J.,  in  Smith  v.  De  Witts,  6  Dowl.  &  R.  120, 
where  lie  holds  that  if  the  bill  upon  which  the  action  was  brought  "had  been 
delivered  to  a  bona  fide  holder  for  valuable  consideration,  and  a  person 
ignorant  of  the  circumstances  under  which  it  had  been  obtained,  he  might 
sue  the  acceptor,  notwithstanding  any  want  of  consideration  received  by  him." 

2  Northampton  Nat.  Bank  v.  Kidder,  106  N.  Y.  221,  12  N.  E.  577;  Weaver 
V.  Barden,  49  N.  Y.  2SG. 


Ch.  8]  VALUE.  ^  293 

desire  to  add  some  discussion  of  the  divisions  of  these  two  topics. 
They  are  the  consideration  necessary  to  malce  the  holder  a  purchaser 
for  value,^  and  that  peculiar  phase  of  the  doctrine  commonly  called 
the  "antecedent"  or  "pre-existing"  indebtedness,  and  whether  it  does 
or  does  not  sustain  the  position  of  the  bona  fide  holder;  *  of  what 
notice  necessary  to  make  the  purchaser  one  without  notice  consists ; 
and,  lastly,  in  conclusion,  the  presumptions  of  evidence  which  attach 
to  a  negotiable  bill  or  note  in  the  hands  of  a  bona  fide  holder  in 
its  proof  upon  trials. 

VALUE. 

123.  Value,  as  a  consideration  for  transfer,  means  any 
legal  consideration  sufficient  to  support  a  contract.  An 
antecedent  or  pre-existing  debt  probably  constitutes  value 
sufficient  for  a  consideration  for  a  negotiable  bill  or  note 
or  the  transfer  thereof. 

124.  THE  TRANSFER— A  bill  or  note  transferred  as 
collateral  to  an  indebtedness  is  probably  transferred  for 
value  and  upon  a  sufficient  consideration. 

8  "The  rule  appears  to  be  settled,  that  a  promissory  note,  to  be  the  subject 
of  sale,  must  be  an  existing  valid  note  in  the  hands  of  the  payee,  and  given 
for  some  actual  consideration,  so  that  it  can  be  enforced  between  the  original 
parties."  Noxon,  J.,  in  Sweet  v.  Chapman,  7  Hun  (N.  Y.)  576.  Where  a  note 
is  discounted  by  a  bank  to  extinguish  a  debt  which  is  owed  to  the  bank  by 
the  holder,  or  where  it  applies  the  proceeds  for  the  purpose  of  discharging 
his  liabilities,  the  acts  of  the  bank  amount  to  the  payment  of  value  at  the 
time,  and  the  bank  is  a  holder  for  valuable  consideration.  Bank  of  Sandusky 
V.  Scoville,  24  Wend.  (N.  Y.)  115.  To  the  same  effect,  see  Bank  of  Salina  v. 
Babcock,  21  Wend.  (N.  Y.)  499.  In  Brown  v.  Leavitt,  31  N.  Y.  113,  it  was 
held  that  where  a  note  is  indorsed  and  delivered  to  a  party,  before  it  falls 
due,  in  payment  of  a  note  already  due,  such  transaction  constitutes  the  party 
a  holder  for  value.  And  see  Rice  v.  Grange  (N.  Y.  App.)  30  N.  E.  46,  Johns. 
Cas.  Bills  &  N.  174. 

4  "Bona  fide  holder,"  "innocent  indorser,"  "bona  fide  holder  without  notice 
and  for  value,"  "purchaser  in  the  usual  course  of  business,"  "purchaser  in  due 
course,"  "holder  in  due  course,"  "purchaser  without  notice,"  are  terms  in- 
differently and  synonymously,  though  loosely,  applied  to  what  is  in  this  sec- 
tion termed  "the  purchaser  for  value  without  notice." 


294  PURCHASER    FOR    VALUE    WITHOUT    NOTICE.  [Ch.   <S 

The  meaning  of  "value"  in  the  term  "purchaser  for  value"  means- 
"either  money  or  money's  worth."  °  It  may  be  cash  paid  out.  It 
may  be  goods  given.  It  may  be  rights  surrendered.  It  may  be 
liabilities  incurred.  Anything  which  men  in  business  call  "prop- 
erty"; anything  for  which  a  court,  on  some  one  being  deprived  of 
it,  would  award  damages;  anything,  in  short,  which  has  an  appre- 
ciable propertied  existence,  is  value.  And  the  purchaser  who  gives 
it  in  exchange  for  a  bill  or  note  is  a  purchaser  for  value,  or  a  pur- 
chaser for  a  valuable  consideration. 

Antecedent  indebtedness  means  a  debt  already  existing  at  the 
time  of  the  execution  of  a  contract,  whatever  it  may  be.  Such,  for 
example,  are  a  note  for  which  a  renewal  note  is  given,  or  a  debt 
created  in  buying  goods  for  which,  at  the  expiration  of  the  terms  of 
credit  for  which  the  goods  were  sold,  a  note  is  given  in  extension. 
The  importance  of  the  doctrine  relates  almost  always  to  the  question 
whether  the  purchaser  of  the  paper  is  a  holder  for  value  or  not.  If 
he  is  to  be  treated  as  a  holder  for  value,  then  the  defenses  in  favor 
of  prior  parties  are  ruled  out ;  if  not,  then  any  prior  party  may  raise 
such  defenses  as  he  has  against  the  person  who  has  taken  the  in- 
strument without  notice,  but  in  consideration  of  the  alleged  anteced- 
ent indebtedness. 

The  wisest  theory,  all  things  being  considered,  is  the  doctrine  of 
Judge  Story.*  He  lays  down  the  doctrine  that  receiving  such  paper 
in  payment  or  as  security  for  a  pre-existing  debt  is  receiving  it  for 
a  valuable  consideration.  "Thus,"  he  says,  "it  may  pass,  not  only 
as  security  for  new  purchases  and  advances  made  upon  the  transfer 
thereof,  but  also  in  payment  of  and  as  security  for  pre-existing  debts. 
In  this  way  the  creditor  is  thereby  enabled  to  realize  or  to  secure 
his  debt,  and  thus  may  safely  give  a  prolonged  credit,  or  forbear 
from  taking  any  legal  steps  to  enforce  his  rights.  The  debtor  also 
has  the  advantage  of  making  his  negotiable  securities  of  equivalent 
value  to  cash.  Otherwise,  the  discounts,  by  banks,  of  negotiable 
securities,  are  restricted,  and  credit  and  circulation  of  negotiable 
paper  hampered."  This  doctrine  is  followed  by  the  weight  of  au- 
thority throughout  the  United  States.  And  it  certainly  seems  the 
sounder  business  policy  to  maintain  that  the  transfer  of  a  negotia- 

B  Ames,  Bills  &  N.  p.  SG7. 

e  Swift  v.  Tysou,  14  Curt.  Dec.  16G,  16  Pet.  1,  Johns.  Cas.  Bills  &  N.  179. 


Ch.  8]  VALUE.  295 

ble  security  both  in  payment  and  as  security  for  an  antecedent  debt 
is  a  transfer  for  value.''  However,  the  courts  of  some  jurisdictions, 
and  particularly  of  the  state  of  New  York,  have  taken  issue  with 
the  doctrine  of  Judge  Story.  The  reasoning  of  these  courts  is  based 
not  so  much  upon  the  practical  doctrines  of  commercial  convenience 
as  upon  the  strict  logic  of  the  law  itself.  Their  doctrine  is  that  the 
position  of  the  bona  fide  holder  rests  its  foundations  upon  the  equi- 
table doctrine  that  a  purchaser  who  holds  the  legal  title  to  property 
merely  as  security  or  as  the  payment  of  a  pre-existing  debt,  without 
parting  with  anything  of  value,  is  not  entitled  to  hold  as  against 
the  prior  equitable  owner.  The  two  elements  of  absence  of  knowl- 
edge and  value  given  must  concur  to  make  the  holder's  equity  a  su- 
perior one.  And  taking  the  instrument  as  a  mere  security  or  in 
nominal  payment  of  a  pre-existing  debt  is  not  giving  value  for  it. 
Hence,  the  position  of  the  holder,  lacking  the  element  of  value  given, 
does  not  entitle  him  to  overthrow  the  defenses  which  other  parties 
may  interpose.*     There  must  be  value  given  or  allowed  on  his  part 

T  Bank  of  Metropolis  v.  New  England  Bank,  1  How.  234;  Barney  v.  Eaiie, 
13  Ala.  106;  Brush  v.  Scribner,  11  Conn.  388;  Meadow  v.  Bird,  22  Ga.  246; 
Conkling  v.  Vail,  31  111.  166;  McKnight  v.  Knisely,  25  Ind.  336;  Homes  v. 
Smyth,  16  Me.  177;  Blanchard  v.  Stevens,  3  Cush.  162;  Thacher  v.  Pray, 
113  Mass.  291;  Outhwite  v.  Porter,  13  Mich.  533;  Stevenson  v.  Hyland,  11 
Minn.  198  (Gil.  128);  Stiuthers  v.  Kendall,  41  Pa.  St.  214;  DLson  v.  Dixon, 
31  Vt.  450.  See,  also,  Bridgeport  Bank  v.  Welch,  29  Conn.  475;  Manning  v. 
McClure,  36  111.  490;  Washington  Bank  v.  Lewis,  22  Pick.  24;  Fisher  v. 
Fisher,  98  Mass.  303;  Armour  v.  McMichael,  36  N.  J.  Law,  92;  Cobb  v. 
Doyle,  7  R.  I.  350.  In  the  case  of  Currie  v.  Misa,  L.  R.  10  Exch.  153,  it  was 
held  that  the  title  of  a  creditor  to  a  negotiable  security  given  to  him  on  ac- 
count of  a  pre-existing  debt,  and  received  by  him  bona  fide  and  without  no- 
tice of  any  infirmity  of  title  on  the  part  of  the  debtor,  is  indefeasible,  whether 
that  security  be  payable  at  a  future  time  or  on  demand.  In  the  case  of  Francia  v. 
Joseph,  3  Edw.  Ch.  (N.  Y.)  182,  it  was  held  that  where  a  note  was  given  to  A  to 
get  it  discounted,  and  he  gives  it  to  B  in  payment  of  a  pre-existing  debt  of  his 
own,  he  who  takes  the  note  cannot  hold  it  as  against  the  owner,  even  though  he 
was  ignorant  of  the  manner  in  which  it  came  into  the  possession  of  A,  and 
though  the  note  was  received  as  a  consideration  for  his  forbearance. 

8  Stalker  v.  McDonald,  6  Hill,  93.  In  this  case  it  was  held  that  where  the 
person  receiving  the  bill  has  taken  it  merely  in  payment  or  security  of  an 
antecedent  debt,  having  neither  parted  with  value  on  the  credit  of  it  nor 
given  up  a  previous  security,  he  will  not  be  entitled  to  hold  the  bill  against 
the  former  rightful  owner,  in  case  of  an  unauthorized  transfer. 


296  PURCHASER    FOR    VALUE    WITHOUT    NOTICE.  [Oil.   8 

on  the  strength  of  the  identical  paper  on  which  the  action  is  brought 
to  make  the  holder  a  purchaser  for  value.®  The  comparative  equi- 
ties of  prior  parties  and  the  holder  turn  upon  this  point.  In  case 
of  payment  the  question  is  whether  he  has  taken  the  instrument  in 
nominal  paA'ment,  without  other  evidence  of  intention  to  discharge 
it  than  the  ordinary  business  transaction  of  accepting  it,  or  receipt- 
ing it  in  payment,  or  crediting  it  on  account  In  each  of  these  latter 
cases  he  stands  in  the  position  he  held  before  receipt  of  the  paper, 
with  the  added  property  of  the  paper  in  his  hands,  for  which  he 
has  neither  given  nor  suffered  anything.  Ilis  right  to  proceed  upon 
the  original  indebtedness  after  the  maturity  of  the  paper  is  unim- 
paired. And  equity  will  not  tolerate  his  holding  the  additional  pa- 
per to  the  prejudice  of  those  parties  who  have  prior  rights  or  de- 
fenses which  render  his  claim  a  wrongful  one.  Hence,  the  rule  is 
established  in  many  states,  in  contradiction  to  the  wiser  theory  of 
Judge  Story,  that  one  who  receives  paper  before  it  is  due,  without 
any  notice  or  knowledge  of  any  fraud  in  its  inception  or  transfer, 
but  for  a  precedent  debt,  and  without  parting  with  any  value  or 
valuable  consideration,  does  not  acquire  a  valid  title  to  the  paper,  but 
takes  it  subject  to  all  its  infirmities.^''  The  courts  who  have  adopted 
this  position  have,  however,  confined  the  scope  of  the  rule  to  narrow 
limits.  If  it  appears  that  the  holder  has  in  any  wise  given  value 
for  the  transfer,  his  title  has  been  supported.  This  has  given  rise 
to  a  large  number  of  decisions  as  to  the  meaning  of  value  in  taking 
paper,  both  in  payment  of  and  as  collateral  security  for  a  precedent 
debt,  which  may  be  approximately  ^^  classified  as  follows: 
(1)  Value  is  given  upon  transfer  when  the  instrument  is  transferred 

»  Bay  V.  Coddington,  5  Johns.  Ch.  54,  Johns.  Cas.  Bills  &  N.  183. 

10  Phoenix  Ins.  Co.  v.  Church,  81  N.  Y.  218;  Comstock  v.  Hier,  73  N.  Y. 
269;  Turner  v.  Treadway,  53  N.  Y.  650;  Weaver  v.  Barden,  49  N.  Y.  286; 
Lawrence  v.  Claik,  36  N.  Y.  128;  Farriugton  v.  Fraukford  Bank,  24  Barb. 
554;  Moore  v.  Ryder,  65  N.  Y.  438;  Potts  v.  Mayer,  74  N.  Y.  594;  Eosa  v, 
Brotherson,  10  Wend.  85;  Payne  v.  Cutler,  13  Wend.  605;  Goggei'ly  v.  Cuth- 
bert,  2  Bos.  &  P.  (N.  R.)  170;  Evans  v,  Kymer,  1  Bam,  &  Adol.  528;  Jones 
v.  Fort,  9  Barn.  &  C.  764;  Wormley  v.  Lowry,  1  Humph.  40S;  Ingham  v. 
Vaden,  3  Humph.  51;  Rhea  v.  Allison,  3  Head,  176;  Hickersoa  v.  Raiguel,  2 
Heisk.  329. 

11  The  term  "approximately"  is  used  because  many  of  the  decisions  are  ap- 
parently iiTeconcilable. 


Ch.  8]  VALUE.  297 

in  satisfaction  of  a  pre-existing  debt,  whether  it  is  in  whole  or  part 
payment  of  the  debt/^  or  whether  the  instrument  surrendered  has 
matured,  or  is  not  yet  due.^^  This  is  because  the  creditor,  in  sur- 
rendering his  rights  under  the  old  debt  in  exchange  for  the  new  pa- 
per, parts  with  value.^* 

(2)  Value  is  given  upon  transfer  when,  at  the  time  thereof,  security 
is  surrendered  by  the  holder  in  consideration  of  the  receipt  by  him 
of  the  instrument.  Such  a  holder  takes  the  instrument  free  from 
the  defenses  of  antecedent  parties,  to  the  extent  of  the  collaterals 
surrendered.^  ° 

The  situation  of  the  creditor  discharging  a  pre-existing  debt  or 
eurrendering  securities  in  consideration  of  the  transfer  of  paper  to 
him,  from  a  legal  point  of  view,  is  not  dissimilar  to  that  of  a  cred- 
itor receiving  paper  as  collateral  security  for  a  debt  due  from  the 
transferror  to  him.  In  taking  the  paper  as  collateral  security,  the 
creditor  still  retains  all  his  rights  upon  the  original  indebtedness. 
The  paper  is  received  by  him  merely  to  further  assure  the  certainty 
of  the  recovery  of  his  debt.  He  may  or  may  not  recover  it  in  full, 
and  if  he  does  not  he  may  proceed  upon  his  collateral.  Therefore, 
in  weighing  the  comparative  equities  of  such  persons  and  those  from 
whom  the  paper  has  been  derived  through  wrong,  the  turning  point 
is  naturally  value.  This  renders  the  equity  superior  or  inferior  ac- 
cording as  it  has  or  has  not  been  given.  And  in  determining  the 
question,  the  cases  have  been  classified  as  follows: 

(1)  Where  the  debt  is  contracted  at  the  time  of  transfer  and  on 
the  faith  of  the  bill  or  note,  or  indorsement  of  a  third  party  as  col- 

12  Chrysler  v.  Renois,  43  N.  Y.  209. 

13  Day  V.  Saunders,  1  Abb.  Dec.  493;    Youngs  T.  Lee,  12  N.  Y.  551. 

14  Mayer  v.  Heidelbach,  123  N.  Y.  332,  25  N.  E.  416;  American  Exch.  Nat. 
Bank  v.  New  York  B.  &  P.  Co.,  74  Hun,  446,  26  N.  Y.  Supp.  822;  Ward  v. 
Howard,  88  N.  Y.  74;  Chrysler  v.  Renois,  43  N.  Y.  209;  Brown  v.  Leavitt.  31 
N.  Y.  113;  Youngs  v.  Lee,  12  N.  Y.  551;  Mix  v.  National  Bank  of  Bloom- 
ington,  91  111.  20;  Bardsley  v.  Delp,  88  Pa.  St.  420;  Norton  v.  Waite,  20  Me. 
175;  Brush  v.  Scribner,  11  Conn.  388;  Dixon  v.  Dixon,  31  Vt.  450;  Kellogg  v. 
Fancher,  23  Wis.  21;  McKnight  v.  Knisely,  25  Ind.  336;  Mayberry  v.  Morris, 
62  Ala.  116. 

15  Goodwin  v.  Conklin,  85  N.  Y.  21;  Phoenix  Ins.  Co.  v.  Church,  81  N.  Y. 
218;  Park  Bank  v.  Watson,  42  N.  Y.  490;  Bank  of  Salina  v.  Babcock,  21 
Wend.  499. 


298  PURCIIASKR    FOR    VALUE    WITHOUT    NOTICE.  [Ch.   S- 

lateral  security,  that  debt  itself  forms  a  part  of  the  consideration  of 
the  transfer  and  constitutes  value.  This  is  because  the  holder  may 
be  supposed  to  part  with  his  property  upon  the  faith  not  only  of  the 
principal  instrument,  but  also  of  the  instrument  put  up  as  collateral. 
The  two,  as  elements  of  the  consideration,  are  inseparable.  The 
courts  will  not  inquire  whether  the  holder  parted  with  value  because 
of  the  original  or  because  of  the  collateral  paper.  They  consider 
such  value  given  for  both.^* 

(2)  TMiere  the  instrument  is  accommodation  paper,  that  fact  is 
no  defense  to  a  holder  who  receives  it  as  collateral  to  a  pre-existing 
debt.  This  is  because  the  delivery  of  the  instrument  as  collateral 
is  in  furtherance  of  the  purpose  of  the  accommodation,  which  was- 
te obtain  credit.  The  equity  of  the  holder,  who  so  takes  it,  is  there- 
fore superior  to  that  of  the  accommodation  party  who  gives  it.^'' 
But  the  reason  of  this  rule  ceases  to  apply,  and  the  rule  itself  is 
otherwise,  when  the  instrument  has  been  diverted  or  procured 
through  fraud.  ^* 

(3)  Where  the  pre-existing  debt  has  fallen  due,  and  there  is  a 
transfer  of  a  bill  or  note  as  collateral  security  with  an  express  agree- 
ment for  delay.  The  forbearance  is  a  sufficient  consideration.  This 
is  because  such  forbearance  is  a  surrender  by  the  holder  of  his  val- 
uable right  of  immediate  prosecution.^^  But  the  rule  only  applies 
for  the  reason  that  the  holder,  by  valid  agreement,  has  estopped  him- 
self from  prosecuting.  K,  therefore,  the  agreement  is  invalid,  and 
there  is  no  legal  reason  why  the  holder  should  not  prosecute,  the 
receipt  of  the  paper  is  upon  a  consideration  which  is  worthless  in 
law,  and  the  holder  is  deemed  to  have  given  no  value.^" 

(4)  In  addition  to  these  rules  are  the  principles  already  discussed^ 
which  apply  to  the  position  of  the  holder  taking  the  instrument  a& 

18  Bank  of  New  York  v.  Vanderhorst,  32  N.  Y.  553;  Bank  of  Chenango  v. 
Hyde,  4  Cow.  567;   Williams  v.  Smith,  2  Hill.  301. 

17  Continental  Nat.  Bank  v.  Townsend,  87  N.  Y.  S;  Grocers'  Bank  v.  Pen- 
field,  69  N.  Y.  502;   Schepp  v.  Carpenter,  51  N.  Y.  602. 

18  Schepp  V.  Carpenter,  51  N.  Y.  602;  Spencer  v.  Ballou,  18  N.  Y.  331;  Bank 
of  Rutland  v.  Buck,  5  Wend.  66. 

19  Mechanics'  &  F.  Bank  v.  Wixson,  42  N.  Y.  438;  Tiaders'  Bank  v.  Brad- 
ner,  43  Barb.  379;  Burns  v.  Rowland,  40  Barb.  368;  Watson  v.  Randall,  20 
Wend.  201. 

20  Atlantic  Nat.  Bank  of  New  York  v.  Franklin,  55  N.  Y.  235. 


Oh.  8]  VALUE.  29^ 

collateral,  as  well  as  wlien  he  takes  it  in  payment.  They  are  (aV 
where  the  note  is  received  in  payment  of  one  then  surrendered  and 
canceled,  or  in  absolute  payment,  (b)  and  where  securities  are  sur- 
rendered. The  principles  upon  which  the  title  of  the  holder  of  col- 
lateral security  rests  regulate  also  the  amount  which  may  be  col- 
lected out  of  it  I 

The  law  permits  the  original  holder  to  transfer  to  the  vendee  such' 
a  right  to  recover  upon  the  paper  as  is  required  to  indemnify  him 
from  loss.  But  it  does  not  permit  the  purchaser  to  make  a  specu- 
lation out  of  the  paper.  Courts  of  equity,  from  which  the  legal  rules 
affecting  commercial  paper  in  this  respect  are  derived,  do  not  extend 
their  protection  in  favor  of  the  purchaser  beyond  that  limit.  The 
holder,  except  so  far  as  he  has  parted  with  value,  has  no  equity  su- 
perior to  the  person  who  has  the  defense;  and  therefore  it  is  that 
the  holder,  taking  paper  as  collateral,  can  only  recover  upon  it  to 
the  amount  of  the  loss  which  he  suffers  upon  the  original  paper; 
that  is  to  say,  the  amount  for  which  the  paper  is  itself  put  up  as 
collateral. ^^  If  the  principal  paper  is  entirely  worthless,  and  in 
amount  equal  or  in  excess  of  the  paper  put  up  as  collateral,  then 
he  may  recover  the  entire  amount  of  the  collateral;  but  otherwise, 
it  is  only  what  he  loses  on  the  principal  paper  which  can  measure- 
his  damages.^^ 

21  Where  a  promissory  note  has  been  transferred  before  maturity  by  way 
of  collatei-al  security  for  future  indoreements  to  be  made  to  the  transferee, 
which  are  afterwards  made  to  him,  the  transferee  is  to  be  treated  as  a  bona 
fide  holder.  He  cannot  recover  upon  the  note  beyond  the  amount  of  the  in- 
dorsements it  was  designed  to  secure  the  holder  against.  Williams  v.  Smith, 
2  Hill  (N.  Y.)  301.  Where  a  note  is  void  as  to  the  payee  by  reason  of  his 
fi-aud  in  obtaining  it,  it  is  nevertheless  good  in  the  hands  of  a  subsequent 
party  who  holds  it  bona  fide  and  for  value,  having  taken  it  before  maturity; 
but,  in  case  such  holder  has  paid  for  it  less  than  the  value  of  the  note,  he 
can  recoveo*  only  the  amount  actually  paid.  Holcomb  v.  WyckofC,  35  N.  J. 
Law,  35.    But  see,  as  to  this  question,  Lay  v.  Wissman,  3G  Iowa,  305. 

2  2  Park  Bank  v.  Watson,  42  N.  Y.  490;  Piatt  v.  Beebe,  57  N.  Y.  339;  Huff 
V.  Wagnei-,  63  Barb.  215;  Card  well  v.  Hicks,  37  Baib.  45S;  Duncan  v.  Gil- 
bert, 29  N.  J.  Law,  527;  Atlas  Bank  v.  Doyle,  9  R.  I.  76;  Maitland  v.  Citi- 
zens' Nat.  Bank,  40  Md.  540;  Mechanics'  &  Traders'  Bank  v.  Barnett,  27 
La.  Ann.  177;  Brown  v.  Callaway,  41  Ark.  420;  Bell  v.  Bean,  75  CaL  87,  16- 
Pac.  521. 


300  PURCHASER  t'OR  VALUE  WITHOUT  NOTICE.         [Ch.  8 


NOTICE. 

125.  Notice  is  either  actual  or  constructive. 

126.  ACTUAL  NOTICE— Means  either  knowledge  or 
means  of  knowledge  to  which  the  purchaser  dishonestly 
shuts  his  eyes. 

127.  CONSTRUCTIVE  NOTICE— Means  knowledge  to 
be  derived  either  from  facts  apparent  on,  or  surround- 
ing, or  to  be  inferred  from,  the  face  of,  or  from  the  facts 
surrounding,  the  instrument  itself,  but  of  w^hich  the  pur- 
chaser is  not  show^n  to  have  knowledge.  Because  these 
facts  are  thus  evident,  the  purchaser  is  charged  w^ith 
knowledge  of  them. 

The  second  element  necessary  to  support  the  title  of  the  pur- 
<:haser  to  the  instrument  is  that  it  must  be  without  notice.  This, 
like  the  doctrine  of  value,  rests  upon  the  principles  of  equity.  It  is 
a  long-established  equity  precedent  that  when  several  different  and 
successive  claims  upon  the  same  subject-matter  exist,  and  there  is 
a  contest  between  the  owners  of  these  interests,  the  person  who 
acquires  a  right  to  the  property  with  knowledge  that  another  person 
has  already  a  claim  to  it  is  deemed  to  take  it  subject  to  that  claim. 
The  first-named  person  has  the  superior  right  to  the  property,  while 
the  last-named  person  owns  in  subordination  to  this  right.  Lord 
Ilardwicke  has  explained  the  reason  to  be  that  "the  taking  of  a 
legal  estate  after  notice  of  a  prior  right  makes  a  person  a  mala  fide 
purchaser.  "This,"  he  says,  "is  a  species  of  fraud  and  dolus  mains 
itself;  for  he  knew  the  first  purchaser  had  the  clear  right  of  the  es- 
tate, and,  after  knowing  that,  he  takes  away  the  right  of  another 
person  by  getting  the  legal  estate.  Now,  if  a  person  does  not  stop 
his  hand,  but  gets  the  legal  estate  when  he  knew  the  right  was  in 
iinother,  machinatur  ad  circumveniendum."  ^*  Or,  in  other  words, 
to  express  the  principle  in  the  language  of  our  later  day,  and  to 
apply  it  to  the  subject-matter  of  bills  and  notes,  the  rule  is  that 
when  an  indorsee  takes  a  bill  or  note  by  indorsement,  without  any 

2  8  Le  Neve  t.  Le  Neve,  2  Arab.  436. 


Ch.  8]  NOTICE.  COl 

knowledge  of  the  equities  of  prior  parties,  he  takes  it  on  an  inde- 
pendent title  by  the  indorsement,  and  will  not  be  affected  by  these 
equities,  because  he  is  not  in  privity  with  such  prior  party,  does  not 
claim  under  him,  and  is  not  bound  by  his  acts,  frauds,  or  admis- 
sions.^^ But  if  he  has  knowledge  of  these  things  at  the  time  of 
the  purchase  of  the  instrument,  and  is  privy  to  them,  then,  because 
of  his  knowledge,  his  title  must  be  in  subordination  to  their  rights. 
This  is  the  fundamental  reason  for  the  effect  of  notice  upon  the  title 
of  the  purchaser;  and  accordingly  we  find  "notice"  defined  as  "the 
information  concerning  a  fact,  actually  communicated  to  a  party, 
by  an  authorized  person,  or  actually  derived  by  him  from  a  proper 
person,  or  else  presumed  by  law  to  have  been  acquired  by  him,  which 
information  is  regarded  as  equivalent  in  its  legal  effects  to  full 
knowledge  of  the  fact,  and  to  which  the  law  attributes  the  same  con- 
sequences as  would  be  imputed  to  knowledge."  ^°  And  in  our  exam- 
ination of  the  question  of  notice,  we  shall  direct  our  inquiry  to  the 
facts  and  rules  which,  according  to  the  law  merchant,  charge  the 
purchaser  with  knowledge  of  the  equities  of  prior  parties,  and  make 
his  title  subject  to  these  equities. 

The  law  merchant,  like  equity  jurisprudence,  classifies  notice  as 
actual  and  constructive.  Under  its  rules,  notice  and  knowledge 
mean  not  merely  express  notice,  but  knowledge  or  means  of  knowl- 
edge to  which  the  party  willfully  shuts  his  eyes."^  And  this  defini- 
tion of  notice  by  Parke,  B.,  which  is  now  accepted  as  that  of  actual 
notice,  is  probably  its  best  one.  But,  in  the  degree  of  knowledge 
necessary  to  be  possessed  by  the  purchaser  to  charge  him  with  no^ 
tice,  the  law  merchant  departs  from  the  rules  of  equity.     In  equity 

24  Fisher  v.  Leland,  4  Cusli.  (Mass.)  456.  In  tbe  opinion  delivered  by  Shaw, 
C.  J.,  in  this  case,  he  held  that,  "when  an  indorsee  takes  a  bill  or  note,  by 
Indorsement,  before  it  is  due,  and  without  notice  of  fi-aud  or  other  matter  of 
defense,  he  takes  it  on  an  independent  title  by  the  indorsement,  and  will 
not  be  affected  by  any  payment,  set-off,  fraudulent  consideration,  or  other 
matter  of  defense,  which  the  acceptor  or  promissor  might  have  had  against 
any  previous  party."  Johnson  v.  Way,  27  Ohio  St.  374,  Johns.  Cas.  Bills  & 
N.  1S5.  As  holding  that  an  attachment  is  unavailable  against  a  bona  fide 
holder  for  value  of  negotiable  paper  who  obtains  it  after  attachment  before 
maturity,  and  without  notice,  see  Kieffer  v.  Ehler,  18  Pa.  St.  3SS. 

2  5  Pom.  Eq.  Jur.  §  594. 

26  May  V.  Chapman,  16  Mees.  &  W.  355. 


502  PURCHASER    FOR    VALUE    WITHOUT    KOTICE.  [Ch.  8 

jurisprudence  notice  maj  be  knowledge  of  any  fact  sufficient  to  put 
tlie  purchaser  upon  inquiry  as  to  the  existence  of  some  right  or  title 
in  conflict  with  that  he  is  about  to  purchase.  Such  knowledge  be- 
ing shown,  the  court  presumes  the  purchaser  either  to  have  made  the 
inquiry  or  else  to  have  been  guilty  of  negligence  equally  fatal  to  his 
claim  to  be  considered  a  bona  fide  holder.  It  is  the  duty  of  each 
purchaser  of  other  property,  if  facts  are  brought  directly  home  to  him 
such  as  would  put  a  reasonably  prudent  man  upon  his  guard,  to 
prosecute  an  inquiry.^^  And  if  the  facts  of  defense,  existing,  but 
latent,  would  have  been  discovered  if  the  investigation  of  the  pur- 
chaser had  been  pursued  to  its  natural  logical  end,  then  the  pur- 
chaser, if  he  did  not  pursue  the  inquiry,  cannot  be  deemed  to  have 
taken  his  title  in  good  faith.'^®  This  doctrine  the  law  merchant  re- 
jects.^" And  it  is  not  the  rule  of  the  law  merchant  that  the  knowl- 
.edge  of  any  facts  sufficient  to  put  the  purchaser  of  a  negotiable  in- 

21  A  bill  of  exchange  was  stolen  during  the  night,  and  taken  early  the  following 
morning  to  a  discount  broker,  by  a  person  wliose  features  were  known  to  the 
broker,  but  whose  name  was  not  knoAvn.  The  broker,  being  satisfied  witli 
the  name  of  the  acceptor,  discounted  tlie  bill,  as  was  his  practice,  without 
making  inquiry  of  the  person  who  brought  it.  In  an  action  on  the  bill  by  the 
broker  against  the  acceptor,  the  jmy  were  properly  directed  to  find  for  the 
defendant  if  they  thought  the  plaintiff  had  taken  the  bill  under  circumstances 
which  ought  to  have  excited  the  suspicions  of  a  prudent  and  careful  man. 
■Gill  V.  Cubitt,  3  Bam.  &  C.  466.  In  the  ease  of  Hatch  v.  Searles,  2  Smale  & 
4j.  147,  it  was  held  that  giving  a  blank  acceptance  is  only  prima  facie  evidence 
of  authority  to  the  person  to  whom  it  is  given  to  fill  up  the  bill;  and,  where 
the  holder  of  a  bill  takes  it  with  notice  of  a  cu-cumstauce  of  suspicion,  he 
can  be  in  no  better  situation  than  the  drawer  or  indorser  who  had  given  no 
value  for  the  bill. 

2  8  Williamson  v.  Brown,  15  N.  Y.  354. 

29  Crook  v.  Jadis,  5  Barn.  &  Adol.  909.  In  this  case,  which  was  an  action  by 
the  indorsee  against  the  drawer  of  an  accommodation  bill,  which  had  been 
fraudulently  disposed  of  by  the  first  indorsee,  and  subsequently  discounted 
by  the  plaintiff,  it  was  held  to  be  no  defense  that  the  plaintiff  took  the  bill 
under  circumstances  which  ought  to  have  excited  the  suspicion  of  a  prudent 
man  that  it  had  not  been  fairly  obtained.  The  defendant  must  show  that 
the  plaintiff  was  guilty  orgross  negligence.  In  Goodman  v.  Hai-vey,  4  Adol. 
&  E.  870,  it  was  held  that  in  an  action  by  the  indoi-see  of  a  bill  who  has 
given  value,  if  his  title  be  disputed  on  the  ground  that  his  indorser  obtained 
the  discount  of  such  bill  in  fraud  of  the  right  owner,  the  question  for  the 
jury  Is  whether  the  indorsee  acted  with  good  faith  in  taking  the  bill.    The 


€h.  8]  NOTICE.  303 

strument  on  inquiry  is  sufficient  to  defeat  his  claim  to  be  consid- 
■ered  a  bona  fide  holder,^*'  unless  he  honestly  makes  an  investigation 
of  them.  Actual  mala  fides  must  be  shown  to  the  satisfaction  of 
the  jury  to  deprive  a  holder  for  value  of  the  character  of  bona  fide 
holder,^^  and  negligence  in  not  inquiring  into  facts  which  ought  to 
have  put  him  on  inquiry  is  not  sufficient.  Gross  carelessness,  even, 
on  the  part  of  the  holder  is  not  conclusive  of  notice,  though  it  is, 
of  course,  perfectly  competent  evidence  to  go  to  the  jury  on  the  ques- 
tion of  bad  faith.32  go  that  in  case  of  bills  and  notes  the  purchaser 
for  value  is  not  bound,  at  his  peril,  to  be  on  the  alert  for  circum- 
stances which  might  possibly  excite  the  suspicions  of  a  wary,  vigi- 
lant man.^'  He  does  not  owe  to  the  party  who  puts  negotiable  pa- 
per afloat  the  duty  of  active  inquiry  to  avert  the  imputation  of  bad 
faith.  And  the  speculative  issue  of  his  diligence  or  negligence  does 
not  enter  into  the  question.  The  question  is  one  simply  of  good 
faith  in  the  purchaser;  and,  unless  the  evidence  makes  out  a  case 
upon  which  the  jury  would  be  authorized  to  find  fraud  or  bad  faith 
in  the  purchaser,  it  is  the  duty  of  the  com-t  to  direct  a  verdict  for  the 
holder.** 

question  whether  or  not  ho  was  guilty  of  gross  negligence  is  improper.  Good- 
man V.  Hai-vey,  4  Adol.  &  E.  870;  Backhouse  v.  Han-ison,  5  Bam.  &  Adol. 
1098. 

30  Magee  v.  Badger,  34  N.  Y.  247;  Belmont  Branch  of  State  Bank  v.  Hoge, 
35  N.  Y.  65;   Parker  v.  Conner,  93  N.  Y.  118. 

31  "The  proper  inquiry  is,  did  tlie  party  seeking  to  enforce  the  payment 
have  knowledge,  at  the  time  of  the  ti-ansfer,  of  the  facts  and  cii-cumstances 
which  impeach  the  title,  as  between  the  antecedent  parties  to  the  instrument? 
And,  If  the  jui-y  finds  that  he  did  not,  tlien  he  is  entitled  to  recover,  unless 
the  transaction  was  attended  by  bad  faith,  even  though  the  instrument  had 
been  lost  or  stolen."    Clifford,  J.,  in  Goodman  v.  Simonds,  20  How.  343. 

32  CanajO'harie  Nat.  Bank  v.  Diefendorf,  123  N.  Y.  191,  25  N.  E.  402;  Sey- 
bel  V.  National  Currency  Bank,  54  N.  Y.  288. 

33  "An  individual  negotiating  for  the  purchase  of  a  bill  or  note  from  one 
having  it  in  possession,  and  whose  name  appears  upon  it.  must  assume  that 
the  title  of  the  holder,  as  well  as  the  liability  of  all  the  parties,  Is  precisely 
that  indicated  by  the  instrument;  that  is,  he  cannot  assume  that  the  person 
in  possession  has  any  other  or  different  rights,  or  that  the  liability  of  the 
parties  is  other  or  different  from  that  which  the  law  would  imply  from  the 
form  or  character  of  the  instrument."  Per  Curiam  in  Central  Bank  v.  Ham- 
oiett,  50  N.  Y.  158. 

34  In  the  case  of  Lawson  v.  Weston,  4  Esp.  56,  it  was  shown  that  a  bill 


304  PURCHASER    FOR    VALUE    WITHOUT    NOTICE.  [Ch.   8 

Constructive  notice  is  a  legal  inference  from  established  facts, 
When  the  facts  are  not  controvertedj  or  the  alleged  defect  appears 
on  the  face  of  the  instrument,  and  is  a  mere  matter  of  ocular  inspec- 
tion, the  question  becomes,  not  one  of  fact  for  the  jury,  but  of  law 
for  the  court.  The  court  determines  whether  these  conceded  facts 
constitute  in  themselves  notice.^^  If  so,  the  notice  is  not  actual,  but 
constructive.  It  is  thus  distinguished  from  actual  notice  in  that  it 
assumes  that  no  direct  information  of  the  fact  sought  to  be  charged 
has  been,  or  need  be,  brought  home  to  the  purchaser.  He  may  or 
may  not  have  had  knowledge  of  the  circumstance  vitiating  his  title. 
But  in  taking  such  instruments  he  is  charged  with  knowledge  of  the 
defect,  whether  he  knows  of  it  or  not.  Instances  of  this  are  a  re- 
strictive or  a  conditional  indorsement,^®  which  being  on  the  face  of 

had  been  lost,  and  the  Icser  had  advertised  it  in  the  newspaper.  The  bill 
was  discounted  for  the  person  who  found  it,  and  thus  came  by  it  fraudu- 
Idntly.  It  was  held  that  the  person  discounting  the  bill  was  entitled  to  re- 
cover the  amoimt,  if  done  bona  fide  and  without  notice  of  the  way  by 
which  the  holder  became  possessed  of  it.  A  bill  payable  to  tlie  order  of 
C  D,  a  married  woman,  was  remitted  to  her  in  respect  of  her  separate  estate. 
Her  husband,  without  her  knowledge,  forged  her  Jiame  on  the  back  of  the 
note,  indorsed  his  own  name  and  gave  it  to  P  to  get  discounted.  P  did  so, 
but  in  order  to  do  so  indorsed  the  bill  himself,  and  gave  the  proceeds  to  the 
husband.  The  acceptor,  on  notice  from  C  D,  refused  to  pay  the  holder,  who 
had  recourse  to  P,  who  paid  the  note.  A  suit  being  brought  by  C  D  to  estab- 
lish her  title  and  resti-aiu  P  from  suing  the  acceptor,  it  was  held  that  P 
was  a  purchaser  for  value,  and  that,  assuming  T?  to  have  notice  that  the 
bill  was  in  respect  of  C  D's  separate  estate,  j-et  he  was  justified  in  relying  on 
the  husband's  statement  that  she  had  indorsed  the  bill,  as  there  was  nothing 
to  excite  suspicion  of  forgery.  Dawson  v.  Prince,  2  De  Gex  &  J.  41; 
Magee  v.  Badger,  34  N.  Y.  247;  Welch  v.  Sage,  47  N.  Y.  147;  Goodman 
V.  Simonds,  20  How.  (U.  S.)  343;  Bank  of  Pittsburgh  v.  Neal.  22  How.  (U. 
S.)  99;  Murray  v.  Lardner,  2  Wall.  (U.  S.)  110;  Comstock  v.  Hannah,  76  III. 
53D;  Spitler  v.  James,  32  Ind.  202;  Worcester  Co.  Bank  v.  Dorchester  &  M. 
Bank,  10  Gush.  4SS;  Spooner  v.  Holmes,  102  Mass.  503;  Miller  v.  Finley.  26 
Mich.  249;  Crosby  v.  Grant,  30  N.  H.  273;  Johnson  v.  Way,  27  Ohio  St.  374; 
Phelan  v.  Moss,  67  Pa.  St.  59. 

35  Birdsall  v.  Russell.  29  N.  Y.  220;    Claflin  v.  Lenheim,  00  N.  Y.  301. 

36  See  supra,  pp.  117-125;  Ancher  v.  Bank  of  England.  2  Doug.  63.  In  this 
case  a  bill  was  drawn  by  A  on  B.  payable  to  C  or  order,  and  indorsed  by  C, 
thus:  "The  within  must  be  credited  to  D,  value  in  account."  D  being  in- 
debted to  B,  and  the  bill  being  sent  to  B,  and  accepted  by  him,  and  he  havin:: 
given  D  notice  that  he  had  received  it  and  placed  it  to  D's  account,  it  wa^ 


Ch.   S]  NOTICE.  o03 

the  instrument,  the  purchaser  must  take  at  his  peril.  Another  ex- 
ample is  overdue  paper,^^  or  paper  which  shows  on  its  face  that 
there  is  something  irregular  or  wrong  about  it.^^  In  all  such  cir- 
cumstances it  is  a  part  of  the  legal  duty  of  the  purchaser  to  inquire 
and  ascertain  concerning  the  facts  of  which  the  face  of  the  bill  or 
note  gives  him  notice.^®  If  he  fails  to  make  his  inquiry,  he  fails  in 
his  full  legal  duty,  and  the  equities  of  the  case  are  with  the  prior 
parties,  who  are  allowed  to  interpose  them. 

These  definite  positions  were  not  arrived  at  until   after  many 

held  that  this  was  such  a  special  indorsement  as  to  restrain  the  negotiability 
of  the  bill.  Should  a  forged  indorsement  be  afterwards  written  upon  it, 
purporting  to  be  by  D  to  pay  to  E  or  order,  and  the  bill  be  discounted,  the 
one  discounting  must  bear  the  loss.  In  More  v.  Manning,  Comyn,  311,  it 
was  held  that  an  original  bill,  payable  to  one  and  his  order,  is  assignable 
afterwards  to  whomsoever  it  is  indorsed,  though  the  words  "or  his  order"  be 
omitted.  The  omission  of  these  words  does  not  make  the  indorsement  re- 
strictive. In  Robertson  v.  Kensington,  4  Taunt.  30,  it  was  held  that,  if  the 
payee  of  a  bill  annexes  a  condition  to  his  indorsement  before  acceptance, 
the  drawee  who  afterwards  accepts  it  is  bound  by  that  condition,  and  if  the 
condition  is  not  performed  the  property  in  the  bill  reverts  to  the  payee,  ami 
he  may  recover  the  contents  against  the  acceptor.  Treuttel  v.  Barandon,  8 
Taunt.  100.  A  bill  drawn  in  America  on  a  London  house,  payable  to  order, 
was  indorsed  by  payee  generally  to  A,  and  by  him  thus:  "Pay  to  B,  or  his 
order,  for  my  use."  B  applied  to  his  bankers  to  discount  the  bill,  which 
they  did  without  inquiry,  and  applied  the  proceeds  to  the  use  of  B.  It  was 
held  that  the  indorsement  was  restrictive,  and  that  the  property  in  the 
bill  remained  in  A,  who  could  recover  its  amount  from  the  bankers.  Lloyd 
V.  Sigourney,  5  Bing.  525.  A  agreed  to  join  B  in  an  accommodation  note  for 
the  latter,  provided  C  would  also  join,  and  an  insti'ument  was  drawn  with  a 
blank  for  name  of  payee,  and  this  was  signed  by  A.  C  refused  to  join,  and 
B  afterwards  delivered  the  instrument  to  D  for  value,  and  D's  name  was 
inserted  as  payee.  Held,  that  D  could  not  recover  against  A.  Awde  v. 
Dixon,  6  Exch.  '869.  In  Buckley  v.  Jackson,  L.  R.  3  Exch.  135,  it  was  held 
that  an  indorsement  of  a  bill  of  exchange,  "Pay  J.  S.,  or  order,  value  in  ac- 
count with  H.  C.  D.,"  was  not  restrictive.  An  indorsement  of  a  note  with- 
out recourse  does  not  affect  its  negotiable  quality.  Epler  v.  Funk,  S  Pa. 
St.  4GS. 

3  7  See  sujn-a,  pp.  199-205. 

3  8  :\tiller  V.  Crayton,  3  Thomp.  &  C.  (N.  Y.)  360. 

39  Thus  in  Fowler  v.  Brautly.  14  Pet.  318,  it  was  bold  that  a  note  overdue, 
or  bill  dishonored,  is  a  circumstance  of  suspicion,  to  put  those  dealing  for  it 
afterwards  on  their  guard. 
KEG.  BILLS — 20 


306  PURCHASER    KOR    VALUE    WITHOUT    NOTICE.  [Ch.   8 

changes  in  the  law  as  it  was  from  time  to  time  administered.  And 
in  all  the  states  the  law  lias  not  yet  developed  into  the  settled  posi- 
tions we  have  given,  regulating  the  degree  of  knowledge  to  be  pos- 
sessed by  the  holder  to  deprive  him  of  the  privileges  of  the  purchaser 
for  value  without  notice.  The  old  tests  are  applied,  which  are  not 
always  in  terms  whether  there  was  actual  notice  consisting  either 
of  direct  knowledge  of  the  defense  or  willful  ignorance  of  it  or 
whether  there  was  constructive  notice  of  the  facts.  Tlie  question  is 
sometimes  whether  the  holder  was  a  bona  fide  transferee  or  a  pur- 
chaser in  the  due  or  usual  course  of  business.  But  these  tests  mean 
pretty  much  the  same  thing,  though  it  involves  a  classification  a 
little  less  exact. 

"Bona  fid^s  or  good  faith"  is  a  term  used  as  a  mere  distinction 
from  mala  fides  or  bad  faith.  If  paper  be  purchased  without  any- 
thing which  the  law  can  construe  into  notice,  it  is  spoken  of  as  be- 
ing purchased  in  good  faith.  Where,  on  the  contrary,  the  purchaser 
has  what  the  law  construes  to  be  notice  of  defects  or  equities,  then 
he  is  a  purchaser  in  bad  faith,  and  can  secure  to  himself  none  of  the 
advantages  given  to  the  bona  fide  purchaser.  But  bad  faith  means 
nothing  more  than  participation  in  the  fraud,  and  resolves  itself  into 
a  question  of  honesty  or  dishonesty,  for  guilty  knowledge  and  will- 
ful ignorance  alike  involve  the  result  of  bad  faith.*"  "It  is  predicat- 
ed," said  Chief  Justice  Church,  "upon  a  variety  of  circumstances, 
some  of  them  slight,  and  others  of  more  significance.  A  perfectly 
upright,  honest  man  might  sell  a  bond  which  had  been  stolen,  and  the 
explanation  might  prevent  even  the  taint  of  wrong  on  his  part,  while 
the  explanation,  although  falling  far  short  of  proof  of  actual  guilt, 
might  leave  upon  the  mind  an  apprehension  that  he  either  directly 
or  impliedly  connived  at  the  wrong,  or,  at  least,  that  he  was  willing 
to  deal  in  securities,  and  keep  his  eyes  and  ears  closed,  so  that  he 
should  not  ascertain  the  real  truth."  *^  Good  faith,  then,  is  absence 
of  knowledge  or  means  of  knowledge  on  the  part  of  the  purchaser 
of  the  facts  which  constitute  the  defense  to  the  instrument  It  is 
evidenced  by  the  facts  of  each  transaction.*^ 

40  Mui-ray  v.  Lardner.  2  Wall.  121. 
*i  Dutchess  Co.  Mut.  Ins.  Co.  v.  Hachfield,  73  N.  Y.  228. 
42  Thus,  since  "there  is  no  implied  authority  for  one  member  to  Indorse 
or  affix  the  name  of  the  firm  to  negotiable  paper,  in  which  the  partnership 


Ch.  8]  NOTICE.  307 

So  also  the  term  "due  or  usual  course  ol  business"  means  "accord- 
ing to  the  usages  and  customs  of  commercial  transactions."  Nego- 
tiable paper  is  taken  in  the  regular  course  of  business  when  re- 
ceived in  transfer  in  the  manner  in  which  mercantile  paper  is  ordi- 
narily used,  and  when  a  business  man  would  ordinarily  have  re- 
ceived the  paper  under  the  circumstances  in  which  it  was  offered, 
and  have  parted  with  his  property  for  it.*^  The  meaning  of  this 
expression  has  been  somewhat  discussed  by  the  courts  of  Iowa.** 
The  view  of  those  courts  seems  to  be  that,  when  a  man  of  ordinary 
business  experience  would  have  been  willing  to  purchase  paper  cir- 
cumstanced as  the  paper  was  in  the  cases  before  them  with  the 
expectation  of  an  easy  and  safe  recovery,  it  was  taken  in  the  usual 
course  of  business.  Thus  neither  an  instrument  found  unindorsed 
in  the  hands  of  one  not  the  payee  and  transferred  by  such  holder, 
nor  paper  which  is  overdue,  nor  a  draft  in  the  possession  of  the  ac- 
ceptor,*^ nor  a  bill  or  note  taken  by  operation  of  law  would  be  taken 
in  course  of  business.*®  For,  in  the  last  case,  to  acquire  title  by  legal 
process  is  not  in  the  regular  course  of  dealing  in  commercial  paper. 
The  transferee  pays  no  value  for  it.  He  can  only  be  deemed  as 
occupying  exactly  the  position  of  the  person  from  whom  he  derived 
the  instrument,  because  he  is  in  law  his  representative.  And  so  in 
these  cases  the  test  of  taking  the  paper  resolves  itself  into  mere 
questions  of  constructive  notice.  It  may,  however,  be  a  question  of 
fraud.  For  it  has  been  held  that  where  the  holder  has  offered  to 
take  for  a  negotiable  instrument  a  sum  so  small  that  the  only  reason- 
able interpretation  could  be  that  there  is  something  wrong  about 
it,  it  was  willful  blindness,  and  an  abstinence  from  inquiry,  so  great 
that  the  court  would  treat  it  as  bad  faith.  The  reason  is  that  it 
is  in  contravention  of  the  habit  of  business  men  to  sell  valuable  rights 

has  no  interest,  for  third  persons,  the  holder  of  such  paper  so  indorsed,  who 
takes  it  with  notice  that  the  indorsement  was  made  for  the  accommodation 
of  the  maker,  cannot  hold  the  firm  liable.  •  •  *  The  partners  are  liable 
to  a  bona  fide  holder  without  notice  in  such  case,  only  because  he  has  the 
right  to  presume  that  the  indorsement  was  made  in  the  usual  course  of  the 
partnership  business."     Pielden  v.  Lahens.  2  Abb.  Dec.  111. 

*s  Edw.  Bills  &  N.  §  519. 

44  Moore  v.  Moore,  39  Iowa,  4G1;   Iowa  College  v.  Hill,  12  Iowa,  462. 

46  Central  Bank  of  Brooklyn  v.  Hammett,  50  N.  Y.  158. 

46  Briggs  V.  Merrill.  5S  Barb.  399. 


o08  PURCHASER    FOR    VALUE    WITHOUT    NOTICE.  [Ch.   S 

for  almost  nothini^,  and  the  courts  deem  an  act  siuli  as  tliis  is  a 
necessary  implication  of  fraud.  V^vf  n  modified  form  of  this  rule  as 
found  in  Xew  York  courts  is  probably  the  true  view.*^  It  appeared 
from  the  evidence  that  notes  obtained  through  a  gross  swindle  were 
bought  for  half  price,  but  no  evidence  was  offered  of  the  good  faith 
of  the  plaintiff  in  buying  the  notes,  and  it  was  held  that  good  faith 
under  such  a  purchase  was  not  presumed,  but  the  plaintiff  must 
show  his  good  faith.  Soon  afterwards  the  same  point  came  up  in  a 
little  different  form,  and,  the  plaintiff  showing  by  the  evidence- 
his  good  faith,  it  was  held  he  was  entitled  to  recover.  Thus,  the  New 
York  courts  hold  what  seems  the  wiser  doctrine,  that  the  small- 
ness  of  the  consideration  is  a  circumstance  of  suspicion  which  throws 
the  burden  of  proof  on  the  holder.  But  it  is  not  conclusive  evidence 
of  notice.  It  is  merely  evidence  which,  if  undenied,  will  destroy  the 
bona  fides  of  the  transaction.  And  it  is  for  the  jury  to  finally  de- 
cide whether  or  not  the  purchaser  had  such  knowledge  of  the  fraud 
that  his  purchase  of  the  instrument  was  a  participation  in  it.^^ 

There  are  two  principles  to  be  added  to  the  discussion  of  the  gen- 
eral doctrine  of  notice.  They  are:  (1)  Notice  to  the  purchaser^ 
actual  or  constructive,  must  exist  at  the  time  of  the  acquirement 
of  the  paper  for  value,  and  tliat  (2)  notice  does  not  destroy  the  equi- 
ties of  a  purchaser  if  he  in  turn  is  the  transferee  of  a  purchaser  for 
value  -without  notice.  In  regard  to  the  first  of  these  rules,  the 
element  of  value  determines  the  comparative  superiority  of  the  equi- 
ties of  the  purchaser  and  the  prior  party  suffering  through  fraud  or 
wrong.  For  unless  the  purchaser  has  parted  with  value  for  the  in- 
strument he  has  acquired,  he  is  in  no  worse  position  than  if  he  had 
not  acquired  the  instrument  at  all.  If,  therefore,  before  he  has 
parted  with  value,  he  receives  notice  of  the  defenses  of  a  prior  party,, 
according  to  the  well-settled  doctrines  of  equity  already  referred  to^ 
he  takes  in  subordination  to  the  prior  party's  rights.  But  the  pay- 
ment of  a  valuable  consideration  changes  the  balance  of  the  equities 
in  his  favor,  and  his  right  to  a  superior  equity  becomes  fixed,  and 
can  be  at  all  times  asserted.     He  is  then  equipped  with  all  the  rights 

<T  Vosburgh  v.  Diefendorf,  48  Hun,  619,  1  N.  Y.  Supp.  5S;    Ricbmoud  T^ 
DLefendorf,  51  Hun,  537,  4  N.  Y.  Supp.  375. 
4  8  Potts  V.  Mayor,  74  N.  Y.  594. 


Ch.  8]  KOTiCE.  309 

of  a  bona  fide  purchaser."  And  so  it  is  that  knowledge  of  the 
fraud  or  wrong  suffered  by  prior  parties  brought  home  to  the  pur- 
chaser after  the  transfer  to  him  for  a  valuable  consideration  cannot 
shake  the  title  he  has  acquired  on  his  purchase.^"  And  this  rule 
goes  to  the  extent  that  if  a  valuable  consideration  is  partly  paid  and 
partly  unpaid,  the  purchaser  is  to  be  protected  to  the  amount  which 
he  has  in  good  faith  paid,"  because  his  equity  is  to  that  extent 
superior  to  that  of  the  prior  party.  The  reason  for  the  second  rule 
is  that  the  purchaser  for  value  without  notice,  when  he  transfers 
the  instrument,  transfers  without  reservation  all  the  rights  he  had 
in  it.  The  transferee  is  subrogated  to  all  these  rights.  And  if  such 
a  transferror  could  have  maintained  an  action  upon  the  bill  or  note, 
the  purchaser  from  him  is  not  affected  by  notice  of  the  defenses  of 
prior  parties.  In  such  a  case  the  necessities  of  the  law  merchant 
prevail  over  the  doctrines  of  equity.  The  comparative  rights  of  the 
prior  party  and  the  holder  are  not  allowed  to  come  into  question. 
For  otherwise  the  right  of  the  bona  fide  holder  to  recover  would 
amount  to  a  property  consisting  of  a  right  which  he  could  not  sell 
and  transfer,  and  the  right  of  sale  and  transfer  is  one  of  the  most 
important  incidents  of  property.  Hence,  as  soon  as  the  paper  comes 
into  the  hands  of  a  holder,  unaffected  by  any  defect,  its  character  as 
a  negotiable  security  is  established.  And  subsequent  notice  of  that 
•defect  to  his  transferee  cannot  affect  the  right  of  action  upon  the 
paper  any  more  than  subsequent  notice  of  any  equity  to  himself. °^ 

*9  Weaver  v.  Bard  en,  49  N.  Y.  2SG;  De  Mott  v.  Starkey,  3  Barb.  Ch.  403; 
Crandall  v.  Vickery,  45  Barb.  156. 

BO  Hoge  V.  Lansing,  35  N.  Y.  13G;  Howard  Banking  Co.  v.  Welchman,  6 
Bosw.  (N.  Y.)  280;  Perkins  v.  White,  36  Ohio  St.  530;  Woodworth  v,  Hun- 
toon,  40  111.  131,  Johns.  Cas.  Bills  &  N.  150. 

01  Dows  V.  Kidder,  84  N.  Y.  121;  Dresser  v.  Missouri  &  I.  Ry.  Const.  Co., 
^3  U.  S.  93,  Johns.  Cas.  Bills  &  N.  187.  This  was  a  case  where  partial  pay- 
ment only  had  been  made  when  notice  of  fraud  was  given,  and  payment 
prohibited.  It  was  held  by  Justice  Hunt  that:  "The  case  before  us  is  gov- 
erned by  the  rule  that  the  portion  of  an  unperformed  contract  which  is 
completed  after  notice  of  a  fraud  is  not  within  the  principle  which  protects 
a  bona  fide  purchaser."  Hubbard  v.  Chapin,  2  Allen,  32S;  Lay  v.  Wissman, 
36  Iowa,  309. 

6  2  Northampton  Nat.  Bank  v.  Kidder.  106  N.  Y.  221,  12  N.  E.  577;  Miller 
V.  Talcott,  54  N.  Y.  114;  Fanners'  &  Citizens'  Nat  Bank  v.  Noxon,  45  N.  Y. 
702;   Chalmers  v.  Lanion,  1  Camp.  383.    This  was  an  action  by  the  second  in- 


310  PURCHASER    FOR    VALUE    WITHOUT    NOTICE.  [Ch.  8 

PRESUMPTION  AND  BURDEN  OF  PROOF— ORDER  OF  PROOF. 

128.  The  holder  of  a  bill  or  note  is,  in  the  first  instance, 
presumed  to  be  a  holder  for  value  and  "without  notice; 
but,  if  it  is  proved  on  the  trial  that  the  bill  or  note,  in 
its  issue  or  negotiation,  was  affected  by  the  defenses  here- 
inafter specified,  it  is  incumbent  for  the  holder  to  prove 
that  he  is  such  a  purchaser. 

129.  The  usual  order  of  proof  on  a  trial  is: 

(a)  To  produce  the  paper  sued  on. 

(b)  To  prove  the   signatures   of  the   acceptor  or 

maker;  or,  if  the  action  is  against  the  in- 
dorser  of  a  bill  or  note  or  drawer  of  a  bill, 
to  prove  their  signatures  and  such  indorse- 
ments as  are  necessary  to  show  transfer  of 
title. 

(c)  To  prove,  as  against  the  drawer  or  indorsers, 

presentment,  demand,  dishonor,  and  notice 
of  dishonor  to  them,  or  circumstances  to  ex- 
cuse these  acts. 

130.  Upon  proof  of  the  facts  specified  in  the  foregoing 
section,  the  holder  may  rest  for  his  recovery  until  evi- 
dence is  adduced  show^ing: 

(a)  That  the   holder  w^hen  he  took  the  paper  had 

notice  of  the  equities. 

(b)  Or  that  there  was  fraud,  duress,  or  illegality  in 

the  inception  of  the  contract,  or  that  its  nego- 

dorsee  ag-ainst  the  acceptor  of  a  bill  of  exchange.  It  was  held  that  if  the 
person  who  indorsed  the  bill  to  the  plaintiff  could  himself  have  caaintained 
an  action  upon  it,  the  defendant  cannot  give  in  evidence  that  it  was  accept- 
ed for  a  debt  conti-acted  in  smuggling,  although  it  was  indorsed  to  the  plain- 
tiff after  it  had  become  due.  Masters  v.  Ibberson,  8  C.  B.  100;  May  v.  Chap- 
man, 16  Mees.  &  W.  355;  Commissioners  of  Marion  Co.  v.  Clark,  94  U.  S.  278; 
Porter  V.  Pittsburg  Bessemer  Steel  Co.,  122  U.  S.  2G7,  7  Sup.  Ct.  120G;  Scot- 
land Co.  V.  Hill,  132  U.  S.  117,  10  Sup.  Ct.  2G;  Verbeck  v.  Scott,  71  Wis.  63,  36 
N.  W.  600;  Shaw  v.  Clark,  49  Mich.  384,  13  N.  W.  786;  Suffolk  Sav.  Bank  v. 
City  of  Boston,  149  Mass.  365,  21  N.  E.  6G5;  Riley  v.  Shawacker,  50  Ind. 
592;  Mornyer  v.  Cooper,  35  Iowa,  257;  Hascall  v.  Whitmore,  19  Me.  102; 
Woodworth  v.  Huntoon,  40  111.  131;   Bassett  v.  Avery,  15  Ohio  St.  299. 


Ch.  S]  PRESUMPTION    AND    BURDEN   OF    PROOF.  311 

tiation  -was  in  fraud  of  the  rights  of  the  de- 
fendant, or  that  it  was  lost  or  stolen. 

131.  Upon  proof  of  facts  specified  last  above,  the  pur- 
chaser must  show  that  he  is  a  purchaser  for  value  with- 
out notice. 

It  is  the  purpose  of  this  section  to  show  the  application  of  the 
rules  set  forth  in  this  and  the  foregoing  chapter  in  their  actual  ad- 
ministration in  courts  of  law.  These  two  chapters  have  attempted 
to  show  that,  where  negotiable  instruments  are  negotiated  to  a 
third  person,  certain  defenses  will  not  be  allowed  to  be  interposed 
against  him  in  his  action  upon  the  instrument,  provided  he  is  a 
purchaser  for  value  and  without  notice.^^  In  asserting  the  instru- 
ment as  a  legal  right,  and  enforcing  it  in  court,  these  principles  take 
the  form  of  presumptions  of  evidence.  By  this  is  meant  that  it 
appearing  to  the  court  that  the  instrument  is  authentic,  and  is  a 
negotiable  bill  or  note,  then  judgment  of  court  will  generally  follow 
as  a  matter  of  course,  despite  the  fact  that  these  defenses  exist  and 
are  asserted  against  the  title  of  the  holder.^*    This  may  be  made 

B3  Where  the  drawer  of  a  bill  payable  to  his  own  order,  before  it  is  in- 
dorsed, gives  the  acceptor  a  general  release,  this  is  no  defense  to  an  action  by 
an  indorsee  against  the  acceptor,  unless  there  be  proof  that  the  indorsee 
knew  of  the  release.  Dod  v.  Edwards,  2  Car.  &  P.  602.  In  an  action  by  a  bona 
fide  indorsee,  against  the  acceptor  of  a  bill  of  exchange,  the  defendant  is  es- 
topped from  pleading  that  the  drawer  and  first  indorser  was  an  uncertificated 
bankrupt  when  the  acceptance  was  given.  Braithwaite  v.  Gardiner,  8  Q.  B. 
473.  See,  also,  Hayes  v.  Caulfield,  5  Q.  B.  SI.  In  Ingham  v.  Primrose,  7  C. 
B.  (N.  S.)  82,  it  was  shown  that  A  accepted  a  bill,  and  gave  it  tO'  B  (who  put 
his  name  thereto  as  drawer).  B,  having  failed  to  discount  the  bill,  returned 
it  to  A,  who  tore  it  in  half.  B  afterwards  picked  up  the  pieces,  joined 
them,  and  put  the  note  in  circulation.  It  was  held  that  A  was  liable  upon 
the  bill,  at  the  suit  of  a  bona  fide  holder  without  notice.  In  Wilson  v.  Nisbet, 
Mor.  Diet.  1509,  it  was  held  that  drunkenness  of  the  acceptor  was  no  defense 
against  an  onerous  indorsee. 

64  la  an  action  of  assumpsit  by  the  indorsee  against  the  maker  of  a  promis- 
sory note,  payable  to  A  B  or  his  order,  it  was  held  that  the  defendant,  who 
had  made  the  note  so  payable,  was  estopped  from  saying  that  A  B  was  not 
competent  to  make  an  order.  Drayton  v.  Dale,  2  Barn.  &  C.  293.  In  Smith 
V.  Marsack,  18  Law  J.  C.  P.  G5,  it  was  held  that  the  plea  by  the  acceijtor 
that  the  indorser  was  a  married  woman  was  bad,  for  a  person  is  not  entitled 


312  PURCHASER    FOR    VALUE    WITHOUT    NOTICE.  [Ch.   8 

clearer,  perhaps,  if  the  meaning  of  a  presumption  is  elaborated  by 
showing  its  application.  It  must  be  kept  in  mind  that  a  court  is, 
so  to  speak,  an  invention  or  machine  for  administering  justice;  and 
that  to  put  this  machine  in  motion  it  is  necessary  to  bring  the  facts 
constituting  a  wrong  to  the  notice  of  a  judge  and  jury  by  written 
evidence  or  the  sworn  testimony  of  persons  who  have  seen  or  known 
the  facts  to  be  proved.  If  these  facts  are  undenied,  or  controverted 
and  proved,  the  court  then  administers  a  remedy.  But  this  the  court 
of  law  can  only  do,  and  the  machinery  of  justice  can  only  be  set  in 
motion,  when  the  facts  constituting  a  violated  right  are  brought 
before  it  by  competent  evidence.  Until  that  time  the  courts  sijt  idly 
by,  awaiting  facts  demonstrating  afiflrmatively  that  some  one  has 
been  wronged.  These  facts  must  be  proved  in  extenso  by  the  per- 
son prosecuting  j;he  remedy,  or  the  plaintiff.  In  case  of  negotiable 
bills  and  notes,  most  of  the  affirmative  proof  necessary  to  establish 
other  kinds  of  contracts  is  unnecessary,  because  the  court,  upon  the 
production  of  the  instrument,  assumes  certain  facts  as  proved  suffi- 
ciently to  entitle  the  plaintiff  to  judgment,  unless  the  defendant 
seeks  to  disprove  them.  So  that  in  the  first  stage  of  the  plaintiff's 
case  the  court,  upon  production  of  the  instrument,  assumes  as  prov- 
ed and  acts  upon  the  following  facts  as  true: 

(1)  That  there  was  a  sufficient  consideration  for  the  promise  or 
order,  or  transfer,  whether  the  receipt  of  a  consideration  was  stated 
or  not.^"^ 

to  dispute  the  power  of  another  to  indorse  an  instniment,  when  he  asserts  by 
the  instrument  that  tlie  other  has  such  power.  In  Montague  v.  Perkins,  22 
Law  J.  C.  P.  187,  it  was  held  by  Jervis,  C.  J.,  that  "in  the  case  of  a  blank  ac- 
ceptance, prima  facie,  the  person  giving  it  gives  the  person  to  whom  it  is  given 
an  opportunity  to  fill  it  up.  *  *  *  As  between  those  two  there  may  be 
secret  stipulations,  binding  upon  them,  but  not  binding  as  between  the  public 
and  the  person  giving  the  blank  acceptance."  The  acceptor  of  a  bill  of  ex- 
change, payable  to  the  order  of  the  drawer,  cannot  deny  the  authority  of  the 
drawer  to  draw  or  indorse  such  bill.  Halifax  v.  Lyle,  3  Exch.  44G.  To  the 
same  effect  see  Barker  v.  Sterne,  9  Exch.  684,  686.  Hogarth  v.  Latham,  3  Q. 
B.  Div.  643;  Baxendale  v.  Bennett,  Id.  525.  And  see  Brook  v.  Teague,  52 
Kan.  119,  34  Pac.  347,  Johns.  Cas.  Bills  &  N.  189. 

5  5  Olsen  V.  Ensign,  7  Misc.  Rep.  082,  28  N.  Y.  Supp.  38;  Bottum  v.  Scott,  11 
N.  Y.  St.  Rep.  514;  Anthony  v.  Harrison,  14  Hun,  198,  affirmed  74  N.  Y.  613; 
Andrews  v.  Chadbourne,  19  Barb.  147. 


Ch.   8]  PRESUMPTION    AND    BURDEN    OF    PROOF.  313 

(2)  That  there  was  such  a  delivery  of  the  instrument  as  is  nec- 
essary to  its  legal  inception.'"' 

(3)  That  the  written  terms  of  the  instrument  state  the  facts  as 
therein  set  forth,"  the  date  showing  the  time  of  execution  ^*  and 
fixing  the  time  of  payment;  °®  the  terms  of  payment  ®°  both  as  to 
its  amount  ^^  and  as  to  its  place.®^ 

(4)  Possession  by  the  holder  in  case  of  an  instrument  payable  to 
bearer,  or  indorsed  in  blank,  or,  in  case  of  an  indorsement  in  full, 
possession  by  the  indorsee,  presumes  title  upon  a  good  considera- 
tion.^^ 

15  6  Sawyer  v.  Warner,  15  Barb.  282.  A  promissory  note  was  deposited  by  the 
maker  before  delivery,  and  was  not  to  be  delivered  until  the  happening  of  a 
certain  contingency,  but  the  note  was  delivered  to  the  payee  before  the  hap- 
pening of  the  contingency,  and  without  the  consent  of  the  maker.  The  payee 
transferred  the  note  for  value.  Held,  that  the  holder  for  value  might  enforce 
payment  against  the  maker.  Fearing  v.  Clark,  16  Gray  (Mass.)  74,  citing  Put- 
nam V.  Sullivan,  4  Mass.  45.  The  fact  that  the  payee  obtained  possession  of 
the  note  by  improper  means,  or  that  the  instrument  was  stolen,  is  no  defense 
against  an  innocent  holder  for  value.    Clarke  v.  Johnson,  54  111.  296. 

67  If  a  person  signs  a  note  containing  a  condition  qualifymg  his  liability, 
which  condition  is  written  in  pencil,  he  is  guilty  of  carelessness;  and,  should 
the  pencil  writing  be  erased,  leaving  no  traces  thereof,  an  innocent  holder  tak- 
ing before  maturity,  for  valuable  consideration,  takes  free  of  any  defense 
arising  from  the  condition,  or  alteration.    Harvey  v.  Smith,  55  111.  224. 

58  Breck  v.  Cole,  4  Sandf.  80;  Germania  Bank  v.  Distler,  4  Hun,  6o3;  1  Pars. 
Bills  &  N.  41. 

69  Joseph  V.  Bigelow,  4  Cush.  82-84. 

60  Walker  v.  Clay,  21  Ala.  797;   Blakemore  v.  Wood,  3  Sneed  (Tenn.)  470. 

61  Norwich  Bank  v.  Hyde,  13  Conn.  282.  Pars.  Bills  &  N.  333-338;  Abb.  Tr. 
Ev.  411. 

62  As  holding  that  the  maker  or  indorser  of  a  note  cannot.  In  an  action  on 
the  note  by  an  indorsee  for  value,  who  took  the  note  before  maturity,  show 
that,  though  dated  at  one  place,  it  was  made  at  another,  by  the  laws  of 
which  latter  place  it  was  void  for  usury,  see  Towne  v.  Rice,  122  Mass.  07. 

63  James  v.  Chalmers,  6  N.  Y.  209;  Kidder  v.  Horribin,  72  N.  Y.  159.  In 
Peacock  v.  Rhodes,  2  Doug.  633,  it  was  held  that,  where  a  bill  of  exchange 
with  a  blank  indorsement  had  been  stolen  and  negotiated,  the  innocent  in- 
dorsee might  recover  on  it.  In  Price  v.  Neal,  3  Burrows,  1355,  it  was  held 
that  an  innocent  indorsee  could  not  be  compelled  to  refund  the  money  paid  to 
him  on  a  forged  acceptance.  If  a  bill  of  exchange  be  drawn  In  favor  of  a  fic- 
titious payee,  and  that  circumstance  be  known  as  well  to  the  acceptor  as  the 
drawer,  and  the  name  of  such  payee  be  indorsed  on  the  bill,  an  innocent  in- 


314  PURCHASER   FOR    VALUE    WITHOUT    NOTICE.  [Ch.  8 

(5)  That  the  instrument  is  unpaid."* 

(6)  That  in  case  of  an  undated  indorsement  the  transfer  and  in- 
dorsement were  made  before  the  maturity  of  the  instrument  and 
without  notice.®'  Thus  the  instrument  itself  is  proof  of  most  of 
the  preliminary  facts  necessary  to  establish  a  right  of  action,  and 
it  remains  to  authenticate  it  as  a  valid  instrument. 

Having  once  produced  the  paper  with  these  presumptions  attached 
to  it,  it  becomes  necessary  for  this  purpose  to  prove  the  following 
facts : 

(1)  If  the  action  is  by  the  payee  against  the  maker  or  acceptor, 
prove  the  maker's  or  acceptor's  signature.®*  It  is  unnecessary  to 
prove  a  demand  of  the  maker  or  acceptor  because  the  suit  is  itself 
a  sufficient  demand.®^ 

(2)  In  an  action  brought  by  an  indorsee  against  the  acceptor,  the 
holder  must  prove  the  signatures  of  acceptor  and  also  the  payee." 

dorsee  for  a  valuable  consideration  may  recover  on  it  against  the  acceptor, 
as  on  a  bill  payable  to  bearer.  Minet  v.  Gibson,  3  Term  R.  481.  If  A 
deposit  bills  indorsed  in  blank,  with  B,  his  banker,  to  be  received  when  due, 
and  the  latter  raise  money  upon  them  by  pledging  them  with  C,  another 
banker,  and  aftern-ards  become  banki-upt,  A  cannot  maintain  trover  against 
C  for  the  bills.  Collins  v.  Martin,  1  Bos.  &  P.  &4S.  And  see  Mechanics'  Bank 
V.  Straiton,  *42  N.  Y.  365.  In  a  suit  by  the  holder  of  a  note  indorsed  by  the 
payee  in  blank,  it  is  the  legal  presumption  that  the  holder  purchased  directly 
from  the  payee.  Peaslee  v.  Robbins,  3  Mete.  (Mass.)  1G4.  Where  indorsers 
commit  a  promissory  note  to  the  maker,  with  a  blank  for  the  date,  they 
authorize  him  to  fill  It  up  with  what  date  he  pleases.  Mitchell  v.  Culver,  7 
Cow.  (N.  Y.)  336. 

64  McKyring  v.  Bull,  16  N.  Y.  297;  Daniel,  Neg.  Inst.  §  1200.  Although  a 
bill  of  exchange  cannot  be  reissued  after  it  has  aiTived  at  maturity  and  been 
once  paid,  yet  if  it  is  paid,  and  afterwards  indorsed  before  it  becomes  due, 
it  is  a  valid  security  in  the  hands  of  a  bona  fide  indorsee.  Burbridge  v. 
Manners,  3  Camp.  193,  194. 

6  3  Hendricks  v.  Judah,  1  Johns.  318;  Andrews  v.  Chadbourne,  19  Barb. 
147;  Lewis  v.  Lady  Parker,  4  Adol.  &  E.  838;  Parkin  v.  Moon,  7  Car.  &  P. 
408;  New  Orleans  Canal  &  Banking  Co.  v.  Montgomery,  95  U.  S.  16;  Leland 
V.  Farnham,  25  Vt.  553;  Mason  v.  Noonan,  7  Wis.  609;  Mobley  v.  Ryan,  14 
111.  51;    Webster  v.  Calden,  56  Me.  204. 

66  Edw.  Bills  &  N.  §  465;    Abb.  Tr.  Ev.  p.  391. 

«T  Green  v.  Goings,  7  Barb.  652. 

68  Where  a  bill  is  drawn  in  the  name  of  a  fictitious  person,  payable  to  the 
order  of  the  drawer,  the  acceptor  is  considered  as  undertaking  to  pay  to  the 


Ch.  8]  PRESUMPTION  AND  BURDEN  OF  PROOF.  3l5 

The  proof  of  the  latter  signature  is  not  for  the  purpose  of  fixing  the 
liability  of  the  payee,  but  of  proving  that  the  title  is  in  the  holder.'* 

(3)  In  an  action  against  an  indorser  of  a  bill  or  note,  the  plaintiff 
need  not  prove  the  signature  of  the  maker/**  drawer/^  or  prior  in- 
dorsers,  because,  on  proof  of  the  defendant's  signature,  the  indorser 
is  deemed  to  warrant  that  of  the  prior  indorser s.''''  In  such  case 
it  is  necessary  to  prove  only  the  signatures  of  the  persons  sought  to 
be  recovered  against. 

(4)  In  case  of  a  note  or  bill  payable  in  blank  or  to  bearer,  no  proof 
of  title  by  proving  signatures  of  indorsers  is  necessary;  '^*  but,  where 
it  is  sought  to  recover  against  a  party  from  whom  title  is  derived 
through  special  indorsements,  the  signatures  of  special  indorsers 
must  be  proved.'^* 

order  of  the  person  who  signed  as  drawer;  and  therefore  an  Indorsee  may 
bring  evidence  to  show  that  the  signatures  of  the  drawer,  to  the  bill  and  to 
the  first  indorsement,  are  in  the  same  handwriting.  Cooper  v.  Meyer,  10 
Bam.  &  C.  468.  In  Robinson  v.  Yarrow,  7  Taunt.  455,  it  was  held  that  the 
acceptance  of  a  bill  drawn  by  procuration  admits  the  drawer's  handwriting, 
and  the  procuration  to  draw.  In  an  action  by  the  indorsee  against  the  ac- 
ceptor of  a  bill  of  exchange,  the  witness  called  to  prove  the  handwriting  of 
the  drawer  stated  that  neither  the  drawing  nor  indorsement  were  of  the 
handwi'iting  of  the  person  whose  they  purported  to  be.  But  it  was  proved 
that  the  defendant  had  acknowledged  the  acceptance  to  be  Iiis,  and  it  was 
contended  that,  as  the  acceptance  admitted  the  drawing  to  be  correct,  the 
jury  might  find  for  the  plaintiff,  if  they  thought,  upon  inspection  of  the  bill, 
that  the  drawing  and  indorsement  were  of  the  same  handwriting.  It  was 
held  necessary,  however,  that  some  proof  should  be  given  as  to  whose  the 
handwriting  was.  Allport  v.  Meek,  4  Car.  &  P.  267.  A  bill  purporting  to  be 
drawn  by  B.  &  W.  (a  real  firm),  payable  to  their  order,  and  indorsed  by  them, 
was  negotiated  by  the  acceptor  with  that  indorsement  upon  it  Both  draw- 
ing and  indorsement  were  forgeries.  It  was  held  that  if  the  bill  was  ac- 
cepted, and  negotiated  by  the  acceptor  with  knowledge  of  the  forgery,  he 
was  estopped  to  deny  the  indorsement,  as  well  as  the  drawing,  by  B.  «&  W. 
Beeman  v.  Duck,  11  Mees.  &  W.  251. 

«o  Coggill  V.  American  Exch.  Bank,  1  N.  Y.  (1  Comst.)  115;  Canal  Bank  v. 
Bank  of  Albany,  1  Hill,  287. 

7  0  Dali-ymple  v.  Hillenbrand,  62  N.  Y.  5. 

Ti  Rose.  N.  P.  Ev.  381-399. 

7  2  Goddard  v.  Merchants'  Bank,  4  N.  Y.  147;  Turnbull  v.  Bowyer,  40  N.  Y, 
456. 

78  James  v.  Chalmers,  6  N.  Y.  209.    See,  also,  supra,  p.  110. 

74  See  supra,  p.  114. 


316  PURCHASEE   FOR    VALUE    WITHOUT    NOTICE.  [Cll.   8 

(5)  Where  the  recovery  is  sought  against  a  drawei" '"^  or  an  in- 
dorser  or  indorsers/^  the  plaintiff,  in  addition  to  this  fact,  must 
prove  that  the  paper  ^as  duly  presented  for  acceptance  or  payment 
and  dishonored,  and  that  due  notice  thereof  was  given  to  the  defend- 
ant." 

Tlie  plaintiff  having  established  all  that  is  necessary  to  entitle 
him  to  judgment,  it  becomes  incumbent  upon  the  defendant  to  prove 
his  defense,  which  he  does  by  proving  in  extenso  whatever  facts 
may  constitute  it.  And  here  the  presumptions  vary  accordingly  as 
the  action  is  between  immediate  parties  or  between  a  remote  party 
and  a  bona  fide  holder.  In  case  of  an  action  litigated  between  im- 
mediate parties,  the  general  rule  is  that  the  evidence  produced  upon 
the  various  issues  is  governed  by  the  rules  governing  the  produc- 
tion and  establishment  of  those  issues  in  case  of  ordinary  contracts. 
But  where  the  litigation  is  between  a  purchaser  for  value  and  a 
prior  party,  the  further  evidence  depends  upon  whether  the  facts 
proved  by  the  defendant  are  those  constituting  a  real  defense  or  a 
personal  defense.  If  the  defense  is  a  real  defense,  the  character  of 
a  purchaser  for  value  without  notice  cannot  avail  the  holder,  and 
the  question  to  be  established  is  solely  whether  the  real  defense 
does  or  does  not  exist  and  is  established  according  to  the  process 
in  ordinary  cases  of  contract.  But  where  the  defense  is  a  personal 
one  the  cases  divide  themselves  into  two  classes,  and  these  are:  (1) 
Cases  where  the  defense  proved  shows  lack  or  failure  of  considera- 
tion or  the  payment  or  discharge  ''^  of  the  bill  or  note;  (2)  cases  where 
the  defense  proved  shows  fraud,  duress,^®  or  the  illegality  of  consid- 

7  6  Shultz  v.  Depuy,  3  Abb.  Prac.  252. 

7  6  Clift  V.  Kodger,  25  Hun,  39. 

77  Conkling  v.  Gandall,  1  Abb.  Dec.  423. 

7  8  In  Morley  v.  Culverwell,  7  Mees.  &  W.  174,  the  facts  were  that  the  drawer 
of  a  bill,  before  it  came  due,  agreed  with  the  acceptor  that,  on  his  giving  a 
certain  mortgage  security  for  the  amount,  he  (the  drawer)  should  deliver  up 
to  him  the  bill  as  discharged  and  fully  satisfied.  The  acceptor  executed  the 
mortgage,  and  received  back  the  bill  uncanceled.  It  was  held  that  the  drawer 
was  liable  on  the  bill  to  a  party  to  whom  the  acceptor  afterwards  indorsed  it, 
for  value,  before  it  came  due. 

7  9  In  an  action  by  the  indorsee  against  the  drawer  of  a  bill  of  exchange,  if 
It  appears  that  the  defendant  drew  the  bill  without  consideration,  and  under 


Ch.   8]  PRESUMPTION    AND    BURDEN    OF    PROOF.  317 

eration  ^°  in  the  inception  of  the  instrument.  In  the  first  class  of 
cases  the  general  presumption  prevails  that  the  indorsee  of  a  nego- 
tiable bill  or  note  is  a  bona  fide  holder  for  value.^^  This  presump- 
tion is  not  repelled  merely  by  proof  that  the  bill  or  note,  as  between 
the  immediate  parties,  was  without  consideration, ^^  or  that  the  con- 
sideration failed,®^  or  was  made,  indorsed,  or  accepted  by  one  for 
the  sole  accommodation  of  the  other.®*  When  no  other  proof  is  given, 
the  holder  is  not  bound  to  prove  a  valuable  consideration.  Thus, 
unless  the  defendant  proves  that  the  plaintiff  had  notice  of  the  fact 
of  such  want  or  failure  of  consideration  or  of  the  payment  or  dis- 
charge of  the  bill  or  note,  or  proves  that  for  some  reason  the  plain- 
tiff is  not  a  bona  fide  holder  for  value,® ^  then  these  facts  are  irrele- 
vant, and  the  defense  will  not  be  received.  But  if  the  defendant 
first  proves  by  evidence  sufficient  to  go  to  the  jury  that  the  transfer 

duress,  it  is  incumbent  on  the  plaintiff  to  prove  thnt  he  gave  value  for  it, 
although  it  was  indorsed  to  him  before  it  came  due.  Duncan  v.  Scott,  1  Camp. 
100. 

80  A  bill  legal  in  its  inception,  and  payable  to  A,  was  indorsed  by  him  to 
B  for  an  usurious  consideration,  who  passed  it  to  a  third  person,  for  valuable 
consideration,  without  notice  of  the  usury,  by  whom  it  was  paid  to  B's  as- 
signees, after  his  bankruptcy,  in  satisfaction  of  a  debt.  Held,  that  the  indorse 
ment  of  A  to  B  on  an  usurious  account  did  not  avoid  the  bill  in  the  hands  of 
an  innocent  holder,  by  virtue  of  the  statute  of  usury.  Parr  v.  Eliason,  1 
East,  92. 

81  Ross  v.  Bedell,  5  Duer  (N.  Y.)  4G2;  Case  v.  Mechanics'  Banking  Ass'n,  4 
N.  Y.  IGG. 

8  2  "The  maker  of  a  negotiable  instrument  is  not  allowed  to  impair  its  value 
in  the  hands  of  a  bona  fide  holder  by  denying  the  existence  of  a  consideration, 
or  by  otherwise  showing  that  it  is  not  what  it  purports  to  be."  Lewis,  J.,  in 
Lennig  v.  Ralston,  23  Pa.  St.  137.  In  Moore  v.  Baird,  30  Pa.  St.  138,  it  was 
held  that  "a  holder  for  Value  may  recover  though  he  knew  at  the  time  he 
purchased  that  it  was  an  accommodation  note,  and  that  there  was  no  consider- 
ation between  the  maker  and  the  payee." 

83  Mechanics'  &  Traders'  Nat;  Bank  v.  Crow,  60  N.  Y.  85. 

84  Harger  v.  Worrall,  69  N.  Y.  370.  When  the  payee  disposes  of  an  accom- 
modation note  at  less  than  its  face,  the  ti'ansaction  is  usurious,  even  though 
the  indorsee  takes  without  notice.    Whitten  v.  Hayden,  7  Allen  (Mass.)  407. 

85  Brookman  v.  Millbank,  50  N.  Y.  378;  Abb.  Tr.  Ev.  441;  Wright  v.  Irwin, 
33  Mich.  32;  Gray  v.  Bank  of  Kentucky,  29  Pa.  St.  365;  Wilson  v.  Lazier,  11 
Grat.  478;  Whittaker  v.  Edmunds,  1  Moody  &  R.  366. 


318  PURCHASER    FOR    VALUE    WITHOUT    NOTICE.  [Oil.    8 

to  the  plaintiff  was  in  bad  faith, *^  or  without  value,'^  he  may  then 
prove  the  facts  of  his  defense.  On  such  proof  by  the  defendant  it 
becomes  incumbent  on  the  plaintiff  to  prove  that  he  is  a  holder  in 
good  faitli  and  for  value.  And  if  he  cannot  prove  this,  he  must  dis- 
prove the  facts  of  the  defendant's  defense,  or  else  he  cannot  recover. 
Cases  where  the  defense  is  fraud  or  illegality  of  consideration  are 
distinguished  from  the  defenses  first  mentioned  in  that  their  proof 
by  the  defendant  changes  the  presumption  that  the  holder  is  one  in 
good  faith  and  for  value,  and  throws  the  burden  of  proving  these 
facts  in  the  first  instance  upon  the  plaintiff.  It  being  shown  that 
the  bill  or  note,  or  the  transfer  thereof,  is  tainted  with  fraud  or  il- 
legality, the  assumption  is  that  the  holder  is  a  partaker  iu  the  fraud 
or  illegality,  and  he  must  prove  that  he  is  not.  In  the  often-quoted 
case  of  Duncan  v.  Scott,"*  where  a  bill  was  given  by  the  defendant 
under  coercion  and  fear  of  death,  Lord  Ellenborough  said:  "It  is 
incumbent  upon  the  plaintiff  to  give  some  evidence  of  consideration ;" 
and  this  principle  has  been  followed  in  many  cases  in  England,  and 
in  most  of  the  states  of  the  United  States.®^  It  has  been  explained 
to  mean  that  a  plaintiff  suing  upon  a  negotiable  note  or  bill  pur- 
chased before  maturity  is  presumed,  in  the  first  instance,  to  be  a 
bona  fide  holder.  But  when  the  acceptor  or  maker  has  show^n  the 
bill  or  note  w'as  obtained  from  him  under  duress,  or  that  he  was 
defrauded  of  it,  the  plaintiff  will  then  be  required  to  show  under 
what  circumstances  and  for  what  value  he  became  a  holder.  The 
reason  for  this  rule  is  that  where  there  is  fraud,  it  is  but  reasonable 
to  suppose  that  he  who  is  guilty  of  it  will  part  with  the  instrument 
for  the  purpose  of  enabling  some  third  party  to  recover  upon  it. 
Such  presumption  operates  against  the  holder  and  devolves  upon 
him  the  duty  of  showing  value  and  lack  of  notice  in  rebuttal  of  the 

««  Smith  V.  Sac  Co.,  11  Wall.  139-147. 

«T  First  Nat.  Bank  v.  Green,  43  N.  Y.  298;    Collins  v.  Gilbert,  94  U.  S.  753. 

88  Duncan  v.  Scott  (1807)  1  Camp.  100. 

89  Clark  V.  Pease,  41  N.  H.  414;  Paton  v.  Colt,  5  Mich.  505;  Carrier  y.  Cam- 
eron, 31  Mich.  373;  Kellogg  v.  Curtis,  G9  Me.  212;  Smith  v.  Livingston,  111 
Mass.  342;  National  Bank  v.  Kirby,  108  Mass.  497;  Rock  Island  Nat  Bank  v. 
Nelson,  41  Iowa,  5G3;  Bailey  v.  Bidwell,  13  Mees.  &  W.  73;  Harvey  v.  Towers, 
6  Exch.  65G;   Smith  v.  Braine,  16  Q.  B.  244. 


Ch.  8]  PRESUMPTION  AND  BURDEN  OF  PROOF.  319 

duress  or  fraud  in  order  to  maintain  his  action.^"  In  the  cases  of 
illegalit}'  the  rule  is  the  same,  and  for  the  same  reason.  The  burden 
is  cast  upon  the  plaintiff  to  show  that  he  took  the  paper  for  value 
and  in  good  faith.  Some  of  the  cases  declare  that  the  holder  need 
not  show  he  had  lack  of  notice,  but  need  only  show  value,^^  because 
the  burden  of  showing  notice  is  upon  the  party  who  seeks  to  impeach 
the  title.  But  the  other  courts  maintain,  and  properly,  that,  in  addition 
to  proving  value,  the  holder  should  prove  that  he  bought  the  note 
in  good  faith,  and  should  show  that  he  had  no  knowledge  or  notice 
of  the  fraud.''^  He  should  show,  also,  that  he  paid  value  for  the 
note;  and,  if  value  and  notice  are  disputed  as  facts,  they  must  be 
passed  upon  by  the  jury.  Hence  it  follows  that  it  is  not  necessary 
for  the  defendant,  as  in  case  of  lack  or  failure  of  consideration,  to 
show  that  the  plaintiff  did  not  pay  value,  or  that  he  had  notice  of 
the  facts  of  the  defense,  but  these  facts  must  appear  afQrmatively 
on  the  plaintiff's  part.  It  is  probable  that  this  rule  does  not  mean 
that  the  plaintiff  must  prove  a  direct  negative,^^  but  that,  as  a  part 
of  the  direct  case,  he  must  show  the  facts  of  the  transaction  consti- 
tuting the  transfer,  and  then,  if  there  is  nothing  in  the  transaction 
itself  to  show  bad  faith,  and  there  is  no  proof  from  other  sources  of 
want  of  good  faith,  or  actual  or  constructive  notice  of  the  defense, 
the  plaintiff  must  prevail. 

90  First  Nat.  Bank  v.  Green,  43  N.  Y.  298;  Wilson  v.  Rocke,  58  N.  Y.  642: 
Harger  v.  WorraU,  69  N.  Y.  370, 

81  Jones  V.  Gordon,  2  App.  Gas.  16;  Kellogg  v.  Curtis,  69  Me.  212;  National 
Bank  v.  Kirby,  108  Mass.  497. 

8  2  Canajoharie  Nat.  Bank  v.  Diefendorf,  123  N.  Y.  191,  25  N.  E.  402;  Vos- 
burgh  V.  Diefendorf,  119  N.  Y.  357,  23  N.  E.  801.  See,  also,  Northampton  Nat. 
Bank  V.  Kidder,  106  N.  Y.  221,  12  N.  E.  577;  Farmers'  &  Citizens'  Bank  v.' 
Noxon,  45  N.  Y.  762;  Cummings  v.  Thompson,  18  Minn.  246  (Gil.  228);  Sullivan 
V.  Langley,  120  Mass.  437;   Smith  v.  Livingston,  111  M^ss.  342. 

83  Sullivan  v.  Langley,  120  Mass.  437;  National  Bank  v.  Kirby,  108  Mass.  497. 


320  PRESENTMENT    AND    NOTICE    01-    DISHONOR.  [Cll.   9 

CHAPTER  IX. 

PRESENTMENT  AND  NOTICE  OF  DISHONOR. 

132.    In  General. 
133-140.    Presentiment 
141-144.  By  Whom  and  to  Whom  Made— Effect  of  Failure  to  Present 

and  Protest. 
145-146.    Notice  of  Dishonor. 

147-    Excuses  for  Failure  to  Present  or  to  Give  Notice. 

IN  GENERAL. 

132.  To  charge  the  drawer  and  indorsers,  presentment 
for  acceptance  or  for  payment,  as  the  case  may  be,  to  be 
follow^ed  in  case  of  refusal  by  notice  of  dishonor,  is  neces- 
sary. 

The  doctrines  of  presentment,  protest,  and  notice  of  dishonor  re- 
late peculiarly  to  the  liabilities  of  the  drawer  and  indorser.  These 
acts,  on  the  part  of  the  holder,  are  a  condition  or  stipulation  which 
the  law  merchant  embodies  in  the  contracts  of  each  of  them.  They 
are  so  much  of  the  essence  of  the  contract  that,  unless  the  holder 
fulfills  them  in  exact  accordance  with  the  requirements  of  law,  he 
cannot  in  most  circumstances  enforce  the  instrument  We  have 
already  pointed  out  ^  that  the  law  construes  the  contract  of  the 
drawer  and  also  of  the  indorser  to  be  distinct  promises  to  every 
party  who  subsequently  takes  the  instrument,  to  pay  the  instrument 
if  the  acceptor  or  maker  does  not.  And  we  have  also  pointed  out  ^ 
that  the  law  implies  as  a  condition  of  the  enforcement  of  this  con- 
tract of  indemnity  that  the  holder  shall  first  seek  the  payment  of 
the  instrument  from  the  persons  primarily  liable  to  pay  it.  If  the  in- 
strument is  not  paid  by  them,  then  there  is  prescribed  a  system  of 
formalities  to  be  strictly  followed  to  enable  the  holder  to  claim  at 
the  law's  hands  the  enforcement  of  the  drawer's  or  indorser's  lia- 
bility.    These  formalities  are  usually,  though  perhaps  inaccurately, 

1  See  supra,  pp.  153-150,  2  See  supra,  pp.  153-150. 


Ch.   9]  PRESENTMENT.  321 

known  as  "presentment,"  "demand,"  "non-payment,"  "protest,"  and 
"notice  of  dishonor,"  some  or  all  of  them  to  be  followed  according  as 
the  case  may  be.  And  it  is  our  purpose  to  take  up  each  of  these 
steps  in  their  order,  to  show  their  nature  and  the  rules  relating  to 
them.  We  shall  first  examine  the  subject  of  presentment,  stating 
the  rules  as  to  its  nature  and  the  time  within  which,  the  place 
where,  and  persons  by  whom  and  to  whom  it  should  be  made. 

PRESENTMENT. 

133.  The  presentment  of  a  bill  or  note  is  commonly  as 
follows: 

(a)  Of  a  bill  for  acceptance. 

(b)  Of  a  bill  or  note  for  payment. 

134.  A  bill  or  note  is  presented  by  exhibiting  it  and  re- 
questing its  acceptance  or  payment.  "When  made,  the  in- 
strument must  be  in  the  possession  of  the  person  present- 
ing the  same. 

135.  Presentment  for  acceptance  may  be  made  at  any 
time  before  maturity,  except  in  cases  of  bills  payable  at 
sight,  or  after  demand,  or  after  sight. 

136.  Bills  payable  at  sight  or  on  demand,  or  after  de- 
mand, or  after  sight,  or  after  any  other  uncertain  event, 
must  be  presented  -within  a  reasonable  time. 

137.  Presentment  for  payment  must  be  made  on  the 
day  -when  the  bill  or  note  is  due.  A  bill  or  note  properly 
presented  for  payment  must  be  paid  forth-with. 

138.  Presentment  should  be  made  during  usual  and 
reasonable  hours. 

139.  The  presentment  for  acceptance,  if  the  bill  is  ad- 
dressed to  the  drawee  at  a  particular  place,  should  be 
made  at  that  place.  If  the  bill  is  not  addressed  to  any 
particular  place,  presentment  should  be  made  either  to  the 
drawee  personally,  or  at  his  dwelling  or  place  of  business 
at  the  time  of  presentment, 

NEC.  BILLS — 21 


322  PUESENTMENT    AM)    xNOTICE    OF    DISHONOR.  [Cll.   9 

140.  It  is  not  necessary  that  a  presentment  for  pay- 
ment should  be  personal.  It  is  sufficient  if  made  at  the 
place  specified  in  the  instrument,  or  personally  if  the 
maker  or  acceptor  waives  his  right  of  having  it  made  at 
the  place  stipulated  in  the  contract,  or,  if  no  place  is 
specified  in  the  instrument,  then  if  made  at  the  place  of 
business  or  residence  of  the  maker  or  acceptor. 

A  proper  legal  presentment  consists  of  an  actual  exhibition  of  the 
paper  ^  to  the  drawee,  acceptor,  or  maker.  In  case  of  a  preseutment 
for  payment,  the  reasons  for  a  personal  presentment  and  an  exhibi- 
tion of  the  bill  *  are  that  the  acceptor  or  maker  may  judge  of  the 
genuineness  of  the  bill;  that  he  may  judge  of  the  right  of  the  holder 
to  receive  the  contents;  and  that  he  may  obtain  immediate  posses- 
sion of  the  bill  or  note,  upon  paying  its  amount     In  case  of  pre- 

3  Daniel,  Neg.  Inst,  §§  462,  4G3;    Edw.  Bills  &  N.  §  558. 

4  Musson  V.  Lake,  4  How.  262. 

0  In  the  case  of  Hansard  v.  Robinson,  7  Barn.  &  C.  9,  which  was  an  action 
by  an  indorsee  against  the  acceptor  of  a  bill  of  exchange,  it  was  shown  that 
the  bill  was  not  presented  for  some  time  after  it  was  due  and  that  the  de- 
fendant offered  another  bill,  but  before  such  bill  was  given,  the  first  bill  was 
lost  by  the  plaintiff's  clerk.  It  was  said  by  Lord  Tenterden,  C.  J.,  in  his 
opinion,  that  it  was  tlie  custom  of  merchants  that:  "The  holder  of  the  bill 
shall  present  the  instrument,  at  its  maturity,  to  the  acceptor,  demand  payment 
of  the  amount,  and  upon  receipt  of  the  money  deliver  up  the  bill.  The  ac- 
ceptor paying  the  bill  has  a  right  to  the  possession  of  the  instrument  for  his 
own  security,  and  as  his  voucher  and  discharge  pro  tanto  in  his  account  with 
the  drawer."  As  to  the  acceptor's  remedy  should  the  holder  refuse  to  deliver 
the  bill  after  receipt  of  pajment,  see  Alexander  v.  Strong,  9  Mees.  &  W. 
733;  Stone  v.  Clough,  41  N.  H.  290;  Otisfield  v.  Mayberrj',  63  Me.  197.  In 
the  case  of  Pierson  v.  Hutchinson,  2  Camp.  211,  it  was  held  by  Lord  Ellen- 
borough  that  in  case  of  the  loss  of  a  bill,  the  indorsee  cannot  recover  against 
the  acceptor,  though  an  indemnity  be  offered.  The  bill  must  be  shown  to 
have  been  destroyed.  In  Ramuz  v.  Crowe,  11  Jur.  715,  it  was  held  that  the 
payee  of  a  negotiable  note  which  has  been  lost  cannot,  without  producing 
the  note,  maintain  an  action  thereon,  at  its  maturity,  against  the  acceptor.  As 
to  instruments  which  have  been  destroyed,  see  Blackie  v.  Piddiug,  11  Law  T. 
203.  As  to  whether  the  owner  of  a  lost  note  may  recover  against  the  in- 
dorser,  upon  giving  indemnity,  it  was  held  by  Hoar,  J.,  in  Tuttle  v.  Standish, 
4  Allen  (Mass.)  4S1,  that  "all  the  considerations  against  allowing  such  a  re- 
covery apply  more  forcfbly  to  the  case  where  payment  is  demanded  of  an 


Ch.  9]  PRESENTMENT. 


323 


sentment  for  acceptance,  the  reasons  for  a  personal  presentment  are 
that  the  acceptor  has  a  right  to  see  that  the  person  demanding 
it  has  a  right  to  do  so  before  he  is  bound  to  answer  whether 
he    will    accept    or   not,    and    that    in    those    jurisdictions   where 
it  is  required  that  the  acceptance  should  be  written  on  the  paper, 
a  demand  for  acceptance  would  clearly  be  futile  unless  the  paper 
were  at  hand  to  write  the  acceptance  upon  it.     But  as  these  reasons 
show,  this  rule  is  for  the  protection  of  the  drawee,  acceptor,  or 
maker,  and  he  may  therefore  waive  them  by  not  insisting  upon  a 
personal  presentment.     If  the  holder  is  in  a  situation  to  comply 
with  their  demand  for  personal  presentment  it  is  sufficient     Hence, 
if  the  holder  has  the  bill  or  note  with  him  at  the  time  of  present- 
ment, and  so  describes  it  as  to  leave  no  doubt  but  that  the  drawee, 
acceptor,  or  maker  understands  what  the  instrument  in  question  is, 
and  the  drawee,  acceptor,  or  maker  does  not  require  him  to  produce 
it,  then  a  refusal  or  omission  to  accept  or  pay  will  subject  all  parties 
to  the  consequent  penalties.*     The  sole  requirement  is   that  the 
instrument  must  be  in  the  possession  of  the  person  presenting  it 
whether  exhibited  or  not.^     The  demand  for  acceptance  or  payment 
in  ordinary  cases  should  be  verbal,  but  in  some  cases  this  may  be 
impracticable  or  not  in  reason  to  be  required.     In  such  cases  it 
may  be  in  writing.     But,  however  made,  it  should  be  absolute, 
requiring  present  actual  acceptance  or  payment." 

indorser,  for  he  is  entitled  to  the  possession  of  the  note  in  order  to  have  his 
recourse  over  against  the  malter." 

«  Etheridge  v.  Ladd,  44  Barb.  69;  Ocean  Bank  v.  Pant,  50  N.  Y.  475;  Cran- 
dall  V.  Schroeppel,  1  Hun,  557;  Freeman  v.  Boynton,  7  INIass.  483;  Draper  v. 
Clemens,  4  INIo.  52;  Nailor  v.  Bowie,  3  ]Md.  251;  King  v.  Crowell,  61  Me.  244; 
Fisher  v.  Beckwith,  19  Vt.  31;   Fullerton  v.  Bank  of  U.  S.,  1  Pet.  604. 

7  In  Arnold  v.  Dresser,  8  Allen  (Mass.)  435,  which  was  an  action  against  the 
indorser  of  a  joint  promissory  note,  the  facts  were  that  upon  the  day  of  ma- 
turity payment  was  demanded  of  the  promisors,  but  the  demandant  did  not 
have  the  note  in  his  possession,  and  he  did  not  receive  payment.  It  was  held 
by  Bigelow,  C.  J.,  that  "no  valid  presentment  and  demand  can  be  made  by 
any  person  without  having  the  note  in  his  possession  at  the  time,  so  that  the 
maker  may  receive  it  in  case  he  pays  the  amount  due,  unless  special  circum- 
stances, such  as  the  loss  of  the  note,  or  its  destruction,  are  shown  to  excuse  its 
absence." 

8  Story,  Prom.  Notes,  §  242.    "A  demand  of  payment,  at  the  place  indicated 


324  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  [Cll.    U 

The  dishonor  of  a  bill  of  exchange  is  the  non-compliance  on  the 
part  of  the  drawee  or  acceptor  with  the  conditions,  which  the  law 
has  construed  to  be  embodied  in  the  order  contained  in  it     The 
order  contained  in  a  bill  of  exchange  on  the  part  of  the    drawer 
and  indorser  is  (1)  an  order  on  the  drawee  to  accept  the  bill  on  pre- 
sentment; (2)  an  order  on  the  drawee  or  acceptor  to  pay  the  bill  at 
maturity.     The  refusal  of  the  drawee  or  acceptor  to  do  either  of 
these  things  dishonors  the  bill.^     The  contract  which  the  drawer 
and  indorser  thus  makes  with  the  holder  is  that  the  drawee  will, 
in  the  first  place,  accept  the  bill.     It  dill'ers  in  cases  of  bills  payable 
after  sight  or  after  demand  and  bills  payable  after  a  given  date, 
because  in  the  former  cases  from  the  terms  of  the  contract  the  time 
for  which  the  drawer  or  indorser  indemnifies  the  holder  is  uncertain 
and  indefinite.      To  prevent  this  from  becoming  a  hardship  to  these 
parties,  the  law  declares  that  in  cases  of  bills  made  payable  after 
sight,  or  after  demand,  or  upon  any  other  event  not  absolutely  cer- 
tain, the  contract  of  the  drawer  and  indorser  is  that  the  drawee,  on 
the  bill  being  presented  to  him  in  a  reasonable  time  from  the  date, 
shall  accept  it,  and,  having  so  accepted,  shall  pay  it  when  duly  pre- 
sented for  payment.^"     But  in  case  of  a  bill  payable  a  certain  time 
after  date,  the  contract  of  the  drawer  and  indorser  is  that  the  drawee 
shall  accept  it  if  it  is  presented  to  him  before  the  time  of  payment; 
and,  having  so  accepted,  shall  pay  it  when  it  is  in  due  course  present- 
ed for  payment.     The  contract  of  the  drawer  and  indorser  is  distin- 
guished from  their  contract  on  bills  payable  after  demand,  or  after 
sight,  in  that  the  drawer,  by  fixing  a  day  certain  for  payment,  as- 
sumes the  responsibility  of  providing  funds  at  that  time,  and  the  in- 
dorser makes  a  new  bill  on  the  same  terms,  and  waives  his  right  of 
immediate  acceptance  by  putting  his  bill  into  circulation  without  ac- 

In  the  note,  on  or  after  its  maturity,  is  a  pre-requisite  to  the  right  of  recovery." 
Martin,  J.,  in  Wood  v.  Mullen,  3  Rob.  (La.)  895,  396. 

8  Ames,  Bills  &  N.  p.  787;    Edw.  Neg.  Inst  §§  529-535. 

10  Allen  V.  Suydam,  20  Wend.  321;  Aymar  v.  Beers,  7  Cow.  705;  Robinson 
V.  Ames.  20  Johns.  14G;  Elting  v.  Brincherhoff,  2  Hall  (N.  Y.)  459;  Muilman 
V.  D'Eguino,  2  H.  Bl.  569;  Wallace  v.  Agry,  4  Mason,  336,  Fed.  Cas.  No.  17,- 
096;  Id.,  5  Mason,  118,  Fed.  Cas.  No.  17,097;  Mitchel  v.  De  Grand,  1  Mason, 
176,  Fed.  Cas.  No.  9,661;  Nichols  v.  Blackmore,  27  Tex.  5S6;  MuUick  v. 
Radakissen,  9  Moore,  P.  C.  40. 


Ch.   9]  PRESENTMENT.  325 

ceptance.  Presentment  for  acceptance  in  this  case  is  therefore  not 
absolutely  essential/^  for,  if  the  bill  is  not  presented  for  acceptance 
at  all,  nevertheless  the  drawer  and  indorser  make  a  contract  that  the 
drawee  shall  pay  it  when  duly  presented  for  payment. 

11  Plato  V.  Rej'uolds,  27  N.  Y.  586.  In  this  case  it  was  said  by  Marvin,  J., 
that  "it  is  not  necessary,  as  to  the  liability  of  the  drawer,  that  the  bill  should 
be  presented  for  acceptance.  If  it  is  duly  presented  for  payment,  and  pay- 
ment is  refused,  and  the  drawer  has  notice,  he  remains  liable."  "In  relation  to 
a  bill  pajable  at  a  day  certain,  as  at  a  fixed  time  after  its  date,  it  is  perfectly 
well  settled  not  only  in  this  country  and  in  England,  but  also  in  Scotland,  and 
in  France,  that  the  drawer  or  indorser  of  the  bill  is  not  discharged  by  the  neglect 
of  the  holder  to  present  the  same  for  acceptance  immediately,  or  until  the  time 
when  it  becomes  due  and  payable."  Opinion  in  Allen  v.  Suydam,  20  Wend.  (N.  Y.) 
321,  323.  "The  drawer  who  issues  his  bill  into  the  world  without  procuring  its  ac- 
ceptance is  not  without  some  degree  of  blame.  He  issues  it  in  an  imperfect 
state,  and  cannot  justly  complain  of  the  neglect  of  any  indorsee  who  talies 
the  bill  in  this  state,  being  cognizant  of  no  circumstances  to  vitiate  it,  and 
looking  merely  at  the  names  upon  it."  Lord  Ellenborough,  C.  J.,  in  Dunn  v. 
O'Keefe,  5  Maule  &  S.  282.  In  the  same  case,  Bayley,  J.,  concurring,  said; 
"Although  the  want  of  notice  may  be  a  good  defense  as  against  the  indorser, 
it  affords  none  as  against  an  innocent  indorsee.  The  drawer  might  avoid  all 
difficulty  by  drawing  the  bill  payable  to  his  own  order,  and  procuring  an  ac- 
ceptance before  issuing  it.  If  he  draw  it  payable  to  a  third  person,  and  issue 
it  in  its  unaccepted  state,  the  imperfection  lies  at  his  door,  and  he  must  take 
the  consequence."  In  the  case  of  Heylyn  v.  Adamson,  2  Burrows,  669,  it 
was  objected  that  "the  action  would  not  lie  against  the  defendant  [the  in- 
dorser] until  a  demand  of  payment  had  been  made  upon  the  drawer";  but  in 
the  opinion  of  the  court,  delivered  by  Lord  Mansfield,  the  decision  as  to  a 
foreign  bill  of  exchange  in  the  case  of  Bromley  v.  Frazier,  1  Strange,  441, 
was  affirmed,  and  it  was  also  held:  "To  entitle  the  indorsee  of  an  inland  bill 
of  exchange  to  bring  an  action  against  the  indorser  upon  failure  of  payment 
of  the  drawee,  it  is  not  necessary  to  make  any  demand  of,  or  inquiry  after, 
the  first  drawer."  "If  the  indorsee  does  not  demand  the  money  payable  by 
the  bill,  of  the  person  upon  whom  it  is  drawn,  in  convenient  time,  and  after- 
wards he  fails,  the  indorser  is  not  liable."  Holt,  C.  J.,  in  Lambert  v.  Oakes, 
1  Ld.  Raym.  443.  As  to  the  necessity  for  two  presentments  in  the  case  of 
sight  bills,  see  Philpott  v.  Bryant,  3  Car.  &  P.  244.  In  Colt  v  Barnard,  18 
Pick.  (Mass.)  260,  it  was  held  that  a  note  indorsed  after  maturity  is  like  a  bill 
payable  at  sight,  and  presentment  to  maker  is  necessary  in  order  that  in- 
dorser may  be  charged.  Bank  of  Washington  v.  Triplett,  1  Pet.  25;  House 
V.  Adams,  48  Pa.  St.  261;  Walker  v.  Stetson,  19  Ohio  St.  400;  Bank  of  Bur- 
lington V.  Raymond,  12  Vt.  401;  Bachellor  v.  Priest,  12  Pick.  399;  Orr  v. 
Maginnis,  7  East,  362;  Goodall  v.  Dolly,  1  Term  R.  713;  Blesard  v.  Hirst,  5 
Burrows,  2670. 


32G  rRESENTMEXT    AND    NOTICE    OF    DISIlOiNOR.  [Ch.    9 

Protest  for  non-acceptance  is  thus  only  for  the  security  of  the 
holder.  He  has  the  option  of  seeking  from  the  drawer  and  indorser 
a  remedy  for  non-acceptance  or  a  remedy  for  non-payment.  If  by 
protest  and  notice  of  non-acceptance  he  has  put  himself  in  a  condi- 
tion to  sue  the  drawer  and  indorser,  he  may,  as  a  matter  of  prudence, 
retain  the  bill,  and  endeavor  to  obtain  payment  from  the  drawee  when 
the  bill  has  arrived  at  maturity,  and  not  involve  himself  in  a  litiga- 
tion until  there  has  been  a  failure  of  payment  as  well  as  of  accept- 
ance.^^ But  by  non-acceptance  followed  by  protest  and  notice  of 
dishonor,  an  immediate  right  of  action  accrues  to  the  holder  against 
both  the  drawer  and  indorsers.^^  And  in  all  these  cases  the  con- 
tract of  the  drawer  and  indorsers  stand  upon  a  similar  footing.^* 

The  following  rules  are  the  principal  ones  relating  to  instruments 
payable  at  or  after  demand  and  at  or  after  sight: 

(1)  Instruments  payable  on  demand  need  not  be  presented  for 
acceptance,  but  they  must  be  presented  for  payment  within  a  rea- 

12  Whitehead  v.  Walker,  9  Mees.  &  W.  50G.  In  this  case  it  was  held  that 
the  holder  of  a  bill  of  exchange,  on  non-acceptance  and  protest,  and  notice 
thereof,  has  an  immediate  right  of  action  against  the  di-awer,  and  does  not 
acquire  a  fresh  right  of  action  on  the  non-payment  of  the  bill  when  due. 
The  statute  of  limitations,  therefore,  rims  against  him  from  the  former,  and 
not  from  the  latter,  period. 

13  Mason  v.  Franklin,  3  Johns.  202;  Welden  v.  Buck,  4  Johns.  144;  Watson 
V.  Loring,  3  Mass.  557;  Union  Bank  v.  Hyde,  6  Wheat.  572;  Sterry  v.  Robin- 
son, 1  Day,  11;  Thompson  v.  Gumming,  2  Leigh,  321;  Smith  v.  Roach,  7  B. 
Mon.  17;  Bright  v.  Furrier,  3  BuiTOws,  1GS7;  Milford  v.  Mayer,  1  Doug.  55; 
Evans  v.  Gee,  11  Pet.  80;  Lucas  v.  Ladew,  28  Mo.  342;  Exeter  Bank  v.  Gor- 
don, 8  N.  H.  6G. 

14  Ballingalls  v.  Gloster,  3  East,  481.  It  was  held  in  this  case  by  Ijord 
Ellenborough,  C.  J.,  that  "there  is  no  distinguishing  the  case  of  an  indorser 
from  that  of  the  drawer,  it  having  been  long  ago  decided  that  every  indorser 
is  in  the  nature  of  a  new  drawer,  every  indorsement  as  a  new  bill,  and  that 
the  indorser  stands,  as  to  his  indorsee,  in  the  law  merchant,  the  same  as  the 
drawer."  See,  also,  the  case  of  Heylyn  v.  Adamson,  2  Buitows,  669,  where 
it  is  said  by  Lord  Mansfield  that  when  a  bill  of  exchange  is  indorsed,  "as 
between  the  indorser  and  indorsee,  it  is  a  new  bill  of  exchange,  and  the  in- 
dorser stands  in  the  place  of  the  dmwer."  See,  also,  the  opinion  in  the  case  of 
Suse  v.  Pomp,  30  Law  J.  C.  P.  75.  In  Peck  v.  Mayo,  14  Vt.  33,  it  was  saifl 
by  Redfield,  J.:  "No  man,  I  apprehend,  doubts  that  the  indorser  of  a  note 
or  bill  is  liable,  in  regard  to  the  principal  debt,  to  the  same  extent  as  the 
original  debtor." 


Ch.    9]  PRESENTMENT.  o27 

sonable  time."     In  case  of  instruments  payable  after  demand,  the 
demand  must  be  made  within  a  reasonable  time. 

(2)  Instruments  payable  at  or  after  sight  must  be  presented  for 
acceptance  or  payment  witliin  a  reasonable  time." 
Time  of  Presentment. 

The  reason  why  bills  payable  on  demand  and  at  sight  differ  in 
the  necessity  for  their  presentment  for  acceptance  is  from  the 
difference  of  meaning  of  the  terms  embodied  in  the  contract 
The  term  "demand"  is  construed  to  mean  an  order  to  pay 
forthwith  upon  presentment.  The  common-law  theory  was  that 
even  demand  was  unnecessary,  because  it  evidenced  a  debt  in 
prsesenti  where  the  debt  itself  was  precedent  to  any  demand.^  ^ 
Hence,  demand  notes  and  instruments  of  that  character  were  not,  in 

16  Walker  v.  Stetson,  19  Ohio  St.  400,  Johns.  Gas.  Bills  &  N.  89.  A  pur- 
chased a  draft  on  C,  of  New  York,  on  March  17th,  in  Erie,  Pa.  On  March 
27th  he  sold  the  draft  to  a  bank  in  Newark,  N.  J.,  and  the  bank  presented  it 
on  the  28th  of  the  same  month.  Payment  was  refused,  and  the  draft  pro- 
tested. It  was  held  that,  under  the  circumstances,  the  presentment  was  in 
reasonable  time.  Newark  Banking  Co.  v.  National  Bank  of  Erie,  63  Pa.  St. 
404.  A  promissory  note,  payable  on  demand,  with  interest,  was  held  in  tlie 
case  of  Merritt  v.  Todd,  23  N.  Y.  28,  to  be  a  continuing  security.  The  holder 
of  such  note  is  not  chargeable  with  neglect  by  reason  of  failure  to  make  de- 
mand within  a  ceitain  time. 

16  "The  law  is  settled  by  an  unbroken  line  of  decisions  that  all  drafts, 
whether  foreign  or  inland  bills,  must  be  presented  to  the  drawee  within  a 
reasonable  time.  *  *  •  But  what  is  a  reasonable  time,  under  all  the  cir- 
cumstances, is  sometimes  a  most  difficult  question.  The  general  doctrine  is, 
each  case  must  depend  on  its  own  peculiar  facts,  and  be  judged  accordingly.'* 
Scott,  J.,  in  Montelius  v.  Charles,  76  IlL  303.  See,  also,  Robinson  v.  Ames, 
20  Johns.  147;  Jordan  v.  Wheeler,  20  Tex.  698.  In  the  case  of  Otsego  County 
Bank  v.  Warren,  18  Barb.  (N.  Y.)  290,  it  was  held  that  a  notary's  certificate 
of  protest  which  stated  that  a  certain  bill  of  exchange  had  been  presented  "to 
one  of  the  firm  of  W.  C.  &  Co.,  the  acceptors,"  for  payment,  was  not  suf- 
ficient. As  holding  that  proof  of  the  insolvency  of  the  maker  or  drawer  is 
not  sufficient  to  excuse  neglect  of  presentation,  see  Smith  v.  Miller,  52  N.  Y. 
545;  Terry  v.  Parker,  6  Law  J.  R.  (N.  S.)  249.  See,  also.  Pier  v.  Heinrichs- 
hofen,  6  Cent.  Law  J.  285;  Turner  v.  Stones,  1  Dowl.  &  L.  122;  Cashman  v. 
Harrison,  90  Cal.  297,  27  Pac.  283,  and  Johns.  Cas.  Bills  &  N.  104;  Cory  v. 
Scott,  3  Bam.  &.  Aid.  619. 

17  Capp  V.  Lancaster,  Cro.  Eliz.  548;  Rumball  v.  Ball,  10  Mod.  38;  Collins  v. 
Denning,  3  Salk.  227;   15  Vin.  Abr.  103. 


3-!8  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  [Ch.    0 

general,  entitled  to  grace."  But  "at  sight"  means  the  same  thing 
as  "upon  acceptance."  And,  as  a  general  thing,  a  bill  or  note  pay- 
able at  sight  or  after  sight  does  not  become  due  until  it  is  seen  or 
accepted.^"  Hence,  bills  payable  at  sight  are  held  to  be  entitled 
to  grace,'"  because  they  do  not  become  due  until  an  opportunity  for 
their  acceptance  is  given,  and,  if  accepted,  the  acceptor  is  entitled  to 
the  usual  extension  of  time  to  pay  them.  As  a  consequence  of  the 
construction  of  these  terms,  bills  payable  on  demand  need  not  be 
presented  at  all  for  acceptance,  but  need  only  be  presented  for  pay- 
ment.'^ But  the  law  nevertheless  limits  the  time  for  which  they 
may  be  held  as  a  security,  and  bills  or  notes  payable  on  demand 
must  be  presented  for  paj'ment  within  a  reasonable  time,  or  else 
they  will  be  treated  as  overdue.^^  If  transferred  after  a  reasonable 
time,  they  are  subject  to  equities,^^  and  the  transferee  is  charged 
with  constructive  notice,  because  the  term  "demand"  implies  a  short 

18  1  Pais.  Notes  &  B.  407;  Story,  Prom.  Notes,  §  224;  Story,  BUls,  §  342; 
Cammer  r.  Harrison,  2  McCord,  246;  First  Nat.  Bank  of  Davenport  v.  Price, 
52  Iowa,  570,  3  N.  W.  639;   Luckey  v.  Pepper,  Morris  (Iowa)  490. 

19  Campbell  v.  Frenchi,  6  Term  R.  200,  2  H.  Bl.  163;  Sutton  v.  Toomer,  7 
Barn.  &  G.  416;  Holmes  v.  Kerrison,  2  Taunt  323;  Sturdy  v.  Henderson,  4 
Barn.  &  Aid.  592.  In  Thorpe  v.  Booth,  Ryan  &  M.  388.  it  was  held  that  the 
statute  of  limitations  did  not  run  against  a  note  payable  24  months  after  de- 
mand until  demand  had  been  made.  A  promissoi-y  note  was  made  in  the  fol- 
lowing form:  "I  promise  to  pay  M.  A.  D.,  or  bearer,  on  demand,  the  sum  of 
£16  at  sight."  Held,  that  no  action  was  maintainable  without  a  presentment 
for  sight.  Dixon  v.  Nuttall,  1  Cromp.,  M.  &  R.  306.  As  holding  that  the  stat- 
ute of  limitations  runs  from  the  date  of  a  note  payable  on  demand,  and  not 
from  the  time  of  demand,  see  Norton  v.  Ellam,  6  Law  J.  Exch.  121.  In 
Sanderson  y.  Bowes,  14  East,  500,  which  was  an  action  in  assumpsit  on  a 
promissory  note,  it  was  held  that  the  declaration  must  aver  presentment  at  the 
place.     See,  also,  Aymar  v.  Sheldon,  12  Wend.  (N.  Y.)  439. 

20  Hart  V.  Smith,  15  Ala.  807;  Thornburg  v.  Emmons,  23  W.  Va,  325;  Jan- 
son  V.  Thomas,  3  Doug.  421. 

21  Daniel,  Neg.  Inst.  §  454. 

22  Herrick  v.  Woolverton,  41  N.  Y.  581;  Crim  v.  Starkweather,  88  N.  Y. 
339;  Furman  v.  Haskin,  2  Caines,  369;  Loomis  v.  Pulver,  9  Johns.  244; 
Ranger  v.  Gary,  1  Mete.  (Mass.)  369;  Cromwell  v.  Arrott,  1  Serg.  &  R.  180. 
It  is  to  be  noted  that  the  term  "with  interest"  does  not  vary  this  construction 
as  to  the  maker  or  acceptor.  Herrick  v.  Woolverton,  supra;  Grim  v.  Stark- 
weather, 88  N.  Y.  339. 

ssWethey  v.  Andrews,  3  Hill,  582;   Sice  v.  Cunningham,  1  Cow.  397. 


Ch.  9]  PRESENTMENT.  329 

term  of  payment,  otherwise  a  prolonged  term  of  credit  would  have 
been  expressed  in  the  instrument.  The  transferee  may  thus  be  pre- 
sumed to  have  inquired  why  the  transferror  did  not  exact  cash  from 
the  maker  or  acceptor,  as  he  might  have  done,  instead  of  seeking  to 
discount  the  instrument  with  him,  and  if  there  is  any  reason  why 
this  cash  should  not  be  paid  the  transferee  is  presumed  to  know  it 
This  rule,  however,  applies  only  to  the  acceptor  and  maker.  As 
its  reasons  show,  it  means  only  that  the  payee  is  allowed  a  reason- 
able time  to  exact  of  the  acceptor  or  maker  the  payment  of  the  bill 
or  note  when  no  time  of  payment  is  expressed,  and  that  if  the  instru- 
ment is  not  presented  for  payment,  but  is  transferred  by  the  payee 
and  subsequent  holders,  its  transferee  is  put  upon  notice  of  their 
equities.  The  contract  of  the  indorser  is  not  affected  by  it,  because 
the  contract  of  the  indorser  is  based  upon  different  considerations. 
The  notice  of  equities  is  confined  to  the  contract  of  the  maker  or 
acceptor.  The  contract  of  the  indorser  is  to  pay  the  instrument, 
if,  upon  demand,  the  acceptor  or  maker  does  not.  His  liability 
accrues  only  upon  the  demand  and  refusal  of  the  acceptor  or  maker 
to  pay,  and  notice  of  dishonor  to  him.^*  And  it  is  therefore  imma- 
terial whether  the  time  at  which  this  demand  is  made  of  the  acceptor 
or  maker  is  reasonable  or  unreasonable.  It  is  sufficient  to  charge 
the  indorser  if  demand  be  made  of  the  acceptor  or  maker  before  the 
acceptor  or  maker  is  discharged  by  operation  of  the  statute  of  limita- 
tions.''' 

In  cases  of  instruments  payable  at  sight,  or  at  a  certain  time 
after  sight,  where  presentment  for  acceptance  is  a  prerequisite,  pre- 
sentment for  acceptance  is  needed  in  order  to  determine  the  day  of 
payment.^®  In  case  of  instruments  payable  after  demand,  present- 
ment must  be  made  for  the  same  reason.  Here  the  same  rule  is 
adopted  for  the  measure  of  time  allowed  for  presentment  as  in  case 
of  the  presentment   for  payment   of  bills  and  notes  payable   on 

24  Parker  v.  Stroud,  98  N.  Y.  379;  Merritt  v.  Todd,  23  N.  Y.  28;  Sbutts  v. 
Fingar,  100  N.  Y.  539,  3  N.  E.  588;  Ferner  v.  Williams,  37  Barb.  10.  It  is  fo 
be  observed  tbat  tbe  words  "witb  interest"  malie  tbis  a  continuing  security  as 
to  the  Indorser.     Merritt  v.  Todd,  23  N.  Y.  28. 

«e  Sbutts  V.  Fingar,  100  N.  Y.  539,  3  N.  E.  588. 

2  6  Mullick  V.  Radakissen,  9  Moore,  P.  C.  66,  28  Eng.  Law  &  Eq.  S6;  Fry  v. 
Hill,  7  Taunt.  397.    And  see  cases  cited  supra,  p.  321. 


330  PRESENTMKNT    AM)    NOTICE    OF    DISHONOR.  [Ch.    9 

demand,  namely,  that  such  instruments  must  be  presented  within 
a  reasonable  time.  The  language  of  the  cases  implies  a  difference 
in  the  liability  of  the  drawer  and  indorsers,  though  a  sufficient 
reason  for  it  does  not  appear.  For  it  is  said  that  otherwise  the 
drawer  or  indorser  will  be  discharged  in  case  of  presentment  for 
acceptance,  and  that  they  have  an  interest  in  having  the  bill  accepted 
immediately  and  paid  according  to  the  terms  of  the  contract.  It 
would  be  a  wrong  to  subject  them  to  indeterminate  delay  in  the 
terms  of  payment  which  they  have  guarantied.  For  they  might 
not  be  able  to  protect  themselves  by  other  means  before  it  is  too 
late,  if  the  bill  or  note  is  not  accepted,  or  accepted  and  paid,  within 
the  time  of  payment  contemplated  by  them.-^  It  would  seem  also 
that  this  rule  applied  also  to  cases  of  presentment  of  such  instru- 
ments for  their  payment. 

The  exact  application  of  the  meaning  of  a  reasonable  time  is  not 
clear,  for  the  question  is  as  yet  an  unsettled  one.  It  has  been  the 
subject  of  discussion  in  the  courts.  No  absolute  measure  of  this 
reasonable  time  has  been  fixed.  The  following  times  have  been 
held  reasonable:  A  day  or  two,^*  seven  days,^^  a  month;  *°  the 
following  unreasonable:  Eight  months,"  three  and  one-half 
months,"-  two  months  and  a  half.^^  By  some  courts  it  is  deemed  a 
question  of  fact,^*  and  the  province  of  the  jury  to  decide;   by  others, 

27  Allen  V.  Suydam,  20  Wend.  321;  Aymar  v.  Berrs,  7  Ck)w.  705,  and  cases 
cited  supra,  p.  321. 

2  8  Field  V.  Nickerson,  13  Mass.  131-137.  In  this  case  it  was  held  that  "the 
condition  on  which  the  indorser  is  liable  is  that  payment  shall  be  demanded 
within  a  reasonable  time,  and  the  earliest  notice  possible  given  of  refusal. 
This  time  may  therefore  vary  according  to  the  circumstances  and  situation  of 
the  parties,  to  be  determined  by  the  jury,  under  the  direction  of  the  court- 
It  is  impossible  to  fix  any  precise  period." 

29  Thurston  v.  M'Kown,  6  Mass.  428. 
80  Ranger  v.  Gary,  1  Mete.  (Mass.)  369. 
31  American  Bank  v.  Jenness,  2  Mete.  (Mass.)  288. 
8  2  Stevens  v.  Bnice.  21  Pick.  193. 

8  3  Losee  v.  Dunkin,  7  Johns.  70.  See,  also,  collated  cases  Tied.  Com.  Pap.  § 
216,  note. 

3  4  Wallace  v.  Agry,  4  Mason,  336,  Fed.  Cas.  No.  17,096;  Fry  t.  Hill,  7 
Taunt.  397.  In  Muilman  v.  D'Eguino,  2  H.  Bl.  553,  the  foUowlBg  was  part  of 
the  opinion  delivered  by  Eyre,  C.  J.:  "I  think,  indeed,  that  the  holder  is 
bound  to  present  the  bill  in  reasonable  time,  in  order  that  the  period  may 


Ch.    9]  PRESENTMENT.  331 

one  of  law,  for  the  court  to  decide.'"  The  better  opinion  would  seem 
to  be  that  it  is  a  question  for  neither  the  jury  nor  the  court  to  decide 
wholly,  and  yet  a  question  in  whose  determination  both  the  jury 
and  the  court  must  take  part.  "What  is  a  reasonable  time,"  said 
Judge  Byles,''  "depends  on  the  circumstances  of  each  particular  case, 
and  is  a  mixed  question  of  law  and  fact,  although  reasonable  time 
in  general,  and  reasonable  time  for  giving  notice  of  dishonor  in 
particular,  is  a  question  of  law,"  In  Muilman  v.  D'Eguino  ^^  Lord 
Chief  Justice  Eyre  explains  the  meaning  of  this  somewhat  vague 
expression  by  saying  that  "what  is  a  reasonable  time  must  depend 
on  the  particular  circumstances  of  the  case;  and  it  must  always  be 
for  the  jury  to  determine  whether  any  laches  is  imputable  to  the 
plaintiff;"  and  the  later  cases  have  developed  fully  his  meaning. 
That  a  reasonable  time  is  a  mixed  question  of  law  and  fact  means 
that  the  question  is  to  be  decided  by  the  jury,  under  proper  instruc- 
tions from  the  court  It  may  vary  much,  according  to  the  particular 
circumstances  of  each  case.  If  the  facts  are  doubtful  or  in  dispute, 
it  is  the  clear  duty  of  the  court  to  submit  them  to  the  jury ;  but,  when 
they  are  clear  and  uncontradicted,  then  it  is  competent  for  the  court 
to  determine  whether  the  time  required  by  law  for  the  presentment 
has  been  exceeded  or  not.^* 

commence  from  which  the  payment  is  to  take  place.  The  question  what  i& 
reasonable  time  must  depend  on  the  particular  circumstances  of  the  case;  and 
it  must  always  be  for  the  juiy  to  determine  whether  any  laches  is  imputable 
to  the  plaintiff."  Fernandez  v.  Lewis,  1  McCord,  322;  Nichols  v.  Blackmore, 
27  Tex.  5S6;  Barbour  v.  Fullertou,  3G  Pa.  St  105. 

ssAymar  v.  Beers,  7  Cow.  707;  Edw.  Bills  &  N.  §§  539-546;  Sice  v.  Cun- 
ningham, 1  Cow.  397;  Poorman  v.  Mills,  39  Cal.  345;  Carll  v.  Brown,  2  Mich. 
401;    Sylvester  v.  Crapo,  15  Pick.  93. 

36  Wood's  Byles,  Bills,  p.  183. 

3T  Muilman  v.  D'Eguino,  2  H.  Bl.  565. 

3  8  Prescott  Bank  v.  Caverly,  7  Gray,  217.  In  the  case  of  Moore  v.  Warren,^ 
1  Strange,  415,  it  was  held  that,  if  the  party  who  receives  a  goldsmith's  bill 
tenders  it  the  next  day,  it  is  not  his  loss  if  the  goldsmith  fails.  As  holding 
that  the  common  usage  in  such  affairs  is  to  be  regarded,  see  Turner  v.  Mead, 
Id.  416.  In  Manwaring  v.  Harrison,  Id.  508,  it  was  held  that  a  person  who 
did  not  demand  a  goldsmith's  note  in  two  days  took  the  credit  on  himself. 
See,  also,  Coleman  v.  Sayer,  1  Barnard.  303.  In  the  case  of  Hankey  v.  Trot- 
man,  1  W.  Bl.  1,  Lee,  C.  J.,  held  that  "it  is  a  question  of  fact  whether  there 
was  convenient  time  allowed  for  receiving  the  money";   and  Denison,  J.,  was 


332  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  [Ch.    9 

Such  being  the  rules  with  reference  to  the  presentment  for  accept- 
ance or  payment  of  bills  and  notes  payable  at  an  uncertain  time, 
contingent  upon  their  being  demanded  or  presented  for  sight  or 
acceptance,  it  remains  to  speak  of  the  rules  reguhiling  the  present- 
ment for  payment  of  bills  and  notes  due  at  a  given  time,  at  what 
time  of  day  they  are  to  be  presented  for  payment,  and  the  effect  of 
the  theory  of  grace  in  extending  the  time  of  the  payment,  as  well 
as  those  payable  at  or  after  sight,  beyond  the  time  stipulated  in  the 
contract  The  bills  and  notes  payable  at  a  given  date,  or  at  a  given 
time  after  date,  or  after  demand,  or  after  sight,  must  be  presented 
when  by  the  terms  of  the  contract  they  are  due.^*  In  general,  this 
does  not  mean  the  day  expressly  stipulated  in  the  contract,  but  it 
means  that  day  with  the  additional  days  implied  by  the  grace  of  the 
law  merchant. 

Lord  Holt,  in  1701,  in  Tassell  v.  Lewis,*"  thus  expounds  the  rule: 
^*In  case  of  foreign  bills  of  exchange,  the  custom  is  that  three  days 
are  allowed  for  the  payment;  and,  if  they  are  not  paid  upon  the 
last  of  the  three  days,  the  party  ought  immediately  to  protest  the 

of  the  opinion  that  "the  question  is  whether  the  plaintiff  has  used  a  reasona- 
ble diligence  or  not.  This  the  jury  ai-e  to  judge  of."  In  Patience  v.  Townley, 
2  J.  P.  Smith  (Eng.)  223,  it  was  held  that  where  it  was  impossible  to  present 
the  bill  in  due  time,  but  where  such  bill  was  afterwards  presented  with  due 
diligence,  and  was  refused  for  want  of  due  presentation,  the  holder  might 
recover  against  antecedent  parties.  In  Rickford  v.  Ridge,  2  Camp.  537,  it 
was  the  opinion  of  Lord  EUenborough  that  "it  is  always  to  be  considered 
whether,  under  the  circumstances  of  the  case,  the  cheque  has  been  presented 
with  due  diligence.  *  *  *  It  seems  to  me  to  be  convenient  and  reasonable 
that  cheques  received  in  the  course  of  one  day  should  be  presented  the  next." 

39  Thus,  in  the  case  of  Anderton  v.  Beck,  16  East,  248,  the  plaintiff  received 
on  the  26th  of  December  a  bUl  due  on  the  28th,  but  kept  It  until  the  29th, 
when  he  sent  it  for  presentment.  The  bill  was  dishonored,  and  it  was  held 
that  the  plaintiff  was  guilty  of  laches  in  keeping  the  bill  until  the  29th.  In 
Williams  v.  Smith,  2  Bam.  &  Aid.  496,  it  was  held  that  the  true  rule  is  that 
a  party,  in  order  to  avoid  laches,  must  give  notice  by  the  next  day's  post. 
In  the  case  of  Pocklington  v.  Silvester,  Chit.  Bills  (10th  Ed.)  346,  note  10,  it 
was  held  to  be  established  as  a  rule  of  law  that  a  party  receiving  a  check  on 
a  banker  has  the  whole  of  the  banking  hours  of  next  day  in  which  to  present 
such  check  for  payment.  As  to  the  allowance  of  a  reasonable  time  for  pre- 
sentment, by  an  administrator,  of  a  bill  found  among  papers  of  the  deceased 
holder,  see  White  v.  Stoddard,  11  Gray  (Mass.)  258. 

40  1  Ld.  Raym.  743. 


Ch.    9]  PRESENTMENT.  333 

bill  and  return  it,  and  by  this  means  the  drawer  will  be  charged. 
But,  if  he  does  not  protest  it  on  the  last  of  the  three  days,  which 
are  called  the  'days  of  grace,'  then,  although  he  upon  whom  the  bill 
is  drawn  fails,  the  drawer  will  not  be  chargeable,  for  it  shall  be 
reckoned  his  folly  that  he  did  not  protest  But  if  it  happens  that  the 
last  day  of  the  said  three  days  is  a  Sunday  or  a  great  holiday, 
as  Christmas  Day,  upon  which  no  money  used  to  be  paid,  then  the 
party  ought  to  demand  the  money  upon  the  second  day;  and,  if 
it  be  not  paid,  he  ought  to  protest  the  bill  the  second  day ;  otherwise, 
it  will  be  at  his  own  peril,  for  the  drawer  will  not  be  chargeable." 
This  doctrine,  thus  declared  to  be  the  law  merchant  in  case  of 
foreign  bills  has  been  largely  followed  by  courts  of  this  country,  and 
is  probably  the  law,  except  when  it  is  modified  by  statute.  It  is, 
however,  very  generally  modified  by  statute.  For  as  the  common- 
law  rule  stands,  since  grace  was  a  mere  indulgence,  and  not  a  right, 
it  was  not  extended  beyond  the  term  of  indulgence  allowed  for 
grace.  Thus,  if  grace  expired  on  Sunday,  the  instrument  would  fall 
due  on  Saturday,^ ^  and  if  that  Saturday  was  a  public  holidaj^  the 
instrument  would  fall  due  on  Friday.*^  But  this  has  been  changed 
by  the  statutes  of  the  various  states  to  the  rule  which  governs  bills 
or  notes  payable  without  grace,  which  allows  payment  on  the  next 
succeeding  business  day,  because,  the  debtor  not  being  compelled  to 
do  business  or  make  payment  on  a  holiday,  the  next  day  is  the  first 
legal  time  at  which  the  creditor  can  demand  payment.**  These 
rules  apply  alike  to  foreign  and  inland  bills  and  promissory  notes,** 

41  Bussard  v.  Levering,  6  Wheat.  102;  Kuntz  v.  Tempel,  48  Mo.  75;  Bar- 
rett V.  Allen,  10  Ohio,  426;  Reed  v.  Wilson,  41  N.  J.  Law,  29.  "When  days 
of  grace  are  allowed  on  a  bill  or  note,  and  the  third  day  falls  on  Sunday,  the 
bill  or  note  is  payable  on  the  previous  Saturday."  Per  Bronson,  J.,  in  Salter 
V.  Burt,  20  Wend.  205.  In  Bowen  v.  Newell,  8  N.  Y.  190,  it  was  held  that 
whether  days  of  grace  should  be  allowed  was  dependent  upon  whether  the 
instrument  was  payable  on  demand  or  at  a  future  date. 

4  2  Story,  Bills,  §  338. 

43  Avery  v.  Stewart,  2  Conn.  69;  Salter  v.  Burt,  20  Wend.  205;  Colms  t. 
Bank,  4  Baxt.  422;    Sands  v.  Lyon,  18  Conn.  18. 

4  4  Bank  of  Washington  v.  Triplett,  1  Pet.  25;  Ogden  v.  Saunders,  12  Wheat 
213;  Brown  v.  Hanaden,  4  Term  R.  148;  Cook  v.  Darling,  2  R.  I.  385;  Beck 
V.  Thompson,  4  Har.  &  J.  531. 


334  PUKiJE.NTMLNT    ASU    NUTICE    OF    DISHONOR.  [Cll.    d 

and  to  paper  pa\'able  in  installments,  grace  being  allowed  upon  each 
installment.*"^ 

The  day  at  which  presentment  for  acceptance  or  for  payment  is  to 
be  made  being  fixed,  the  courts  lay  down  a  series  of  rules  which 
are  quite  explicit  in  stating  the  hours  of  the  day  at  which,  under 
various  circumstances,  presentment  for  acceptance  or  payment  is  to 
be  made.  The  general  rule  is  that  presentment  should  be  made 
during  usual  and  reasonable  hours.  With  business  men  the  legal 
meaning  of  "usual  and  reasonable  hours"  is  any  time  during  the 
projjer  hours  of  business.  These  vary,  and  generally  range  through 
the  whole  day  to  bedtime,  in  the  evening.**  They  are  classified  as 
follows: 

(1)  Presentment  at  a  bank  should  be  during  banking  hours,* ^  but 
if  made  after  banking  hours,  to  the  proper  authorities  in  the  bank, 
it  is  sufficient.*® 

(2)  Presentment  at  a  place  of  business,  during  the  usual  business 
hours,*®  though  a  demand  to  any  proper  person  at  a  place  of  busi- 
ness after  business  hours  is  sufticient^" 

4  5  Oridge  V.  Sherborae,  11  Mees.  &  W.  374. 

4  6  Cayuga  Co.  Bank  v.  Hunt,  2  Hill,  G35. 

4  7  Elford  V.  Teed,  1  Maule  «&  S.  28;  Pai-ker  v.  Gordon,  7  East,  38.5  (in  th'is 
case  it  was  held  that  if  a  bill  be  accepted  payable  at  A's,  who  is  the  ac- 
ceptor's banker,  the  party  taking  such  special  acceptance,  which  he  is  not 
bound  to  do,  thereby  impliedly  agrees  to  present  it  for  payment  within  the 
usual  banking  hours  at  the  place  where  it  's  made  payable);  Staples  v. 
Franklin  Bank,  1  Mete.  (Mass.)  43;  Thorpe  v.  Peck,  28  Vt.  127. 

4  8  In  the  case  of  Salt  Springs  Bank  v.  Burton,  58  N.  Y.  432,  it  was  shown 
that,  upon  the  day  the  note  was  due  the  indorser,  being  prepared  to  pay  it, 
sent  the  maker  to  the  bank  during  banking  hours  to  ascertain  the  amount. 
The  note  was  presented  for  payment,  an  hour  after  the  close  of  banking  hours, 
by  the  holder,  to  the  cashier,  and  payment  demanded.  This  was  refused  on 
the  ground  that  there  were  no  funds  deposited  for  the  purpose.  It  was  held 
that  the  indorser  was  charged  by  such  demand.  And  see  Bank  of  Syracuse 
V.  Hollister,  17  N.  Y.  4G;  Bank  of  Utica  v.  Smith,  18  Johns.  230:  Flint  v. 
Rogers,  15  Me.  67;  Crook  v.  Jadis,  6  Car.  &  P.  191;  Commercial  Bank  v. 
Hamer,  7  How.  (Miss.)  448;  Cohea  v.  Hunt,  2  Smedes  &  M.  227;  Shepherd 
V.  Chamberlam,  8  Gray,  225;   Bank  of  Utica  v.  Philips,  3  Wend.  408. 

4  9  Luut  V.  Adams,  17  Me.  2.30;  Wallace  v.  Crilley,  46  Wis.  577,  1  N.  W.  301; 
Triggs  V.  Newnham,  1  Car.  &  P.  631;  Strong  v.  King,  35  111.  9,  Johns.  Cas. 
Bills  &  N.  93. 

BO  Henry  v.  Lee,  2  Chit.  124;    Garnett  v.  Woodcock,  6  Maule  &  S.  44.    In 


Ch.   9]  PRESENTMENT.  33> 

(3)  Presentment  at  one's  residence  between  the  usual  hours  of 
rising  and  retiring.'^  But  it  is  sufficient  if  made  upon  the  ac- 
ceptor or  maker  personally  at  any  time.''^ 

In  addition  to  this  general  classification,  there  are  other  consid- 
erations, depending  largely  upon  the  circumstances  of  each  partic- 
ular case.  The  principal  ones  are  the  usage  of  trade,  and  the  loca- 
tion of  the  domicile  of  the  person  to  whom  presentment  is  to  be 
made."^  But  the  general  principle  underlying  these  considera- 
tions is  that  the  person  making  the  presentment  should  use  due  and 
proper  diligence,  and  that  the  presentment  should  be  made  at  such 
a  time  of  day  that  the  person  expected  to  make  the  payment  or  give 
the  acceptance,  in  the  exercise  of  ordinary  business  prudence,  can- 
not be  supposed  to  have  been  taken  off  his  guard  or  caught  with- 
out funds.  It  is  almost  needless  to  add  that  presentment  at  an  im- 
proper time,  as  a  legal  act,  is  a  nullity.^*  And  that  the  demand  for 
payment  may  be  made  at  any  time  within  the  proper  period,  al- 
though the  acceptor  or  maker  has  the  whole  of  the  day  to  make  the 
payment.  If  he  is  ready  to  pay  on  the  same  day  after  a  demand 
has  been  made,  at  the  proper  time  he  must  seek  the  creditor  and 
tender  payment.°^     The  eifect  of  the  demand  upon  the  liability  of 

this  case  a  presentment  of  a  bill  of  exchange  at  the  banking  house  where 
payable,  after  banking  hours,  is  sufficient  if  a  person  be  stationed  at  the 
banking  house,  and  return  answer  of  "No  orders." 

51  Salt  Springs  Bank  v.  Buiton,  58  N.  Y.  430;  Nelson  v.  Fotterall,  7  Leigh, 
179;  Skelton  v.  Dustin,  92  111.  49.  In  the  case  of  Barclay  v.  Bailey,  2  Camp. 
527,  it  was  held  that  the  presentment  of  a  bill  of  exchange  for  payment  at 
the  house  of  a  merchant  at  8  o'clock  in  the  evening  of  the  day  it  became  duB 
was  sufficient  to  charge  the  drawer.    Dana  v.  Sawyer,  22  Me,  244. 

62  Farnsworth  v.  AUen,  4  Gray,  453;  King  v.  Crowell,  Johns.  Cas,  Bills  & 
N,  91. 

63  Notes  to  Bigelow,  Cas.  Bills  &  N.  24G. 

64  Johnson  v.  Haight,  13  Johns.  470;  Wiffen  v.  Roberts,  1  Esp.  261;  Mitchell 
V.  De  Grand,  1  Mason,  176;  Walsh  v.  Dart,  12  Wis.  635;  Kohler  v.  Mont- 
gomery, 17  Ind.  220;  Leavitt  v.  Simes,  3  N.  H.  14.  In  the  case  of  Dana  v.  Saw- 
yer, 22  Me.  244,  it  was  held  that  presentment  at  nearly  midnight  to  the  maker, 
after  the  latter  had  retired,  would  not  be  sufficient,  unless  there  was  a  waiver, 
or  unless  it  was  shown  that  payment  would  not  have  been  made  on  a  demand 
at  a  proper  hour, 

66  1  i'ars.  374;   Rand.  Com.  Paper,  §  1002. 


336  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  [Ch.   9 

tho  distinct  contracts  of  the  maker  and  acceptor  and  of  the  drawer 
and  indorser  will  be  examined  subsequently." 
Place  of  Presentment. 

The  next  step  in  our  examination  of  the  subject  of  presentment 
is  the  place  where  it  is  made.  The  underlying  principles  are  much 
the  same  in  case  of  presentment  for  acceptance  and  of  presentment 
for  payment,  though  in  case  of  presentment  for  payment  a  very 
prominent  element  is  that  some  place  of  payment  is  usually  indi- 
cated in  the  instrument  which  becomes  an  important  stipulation 
and  term  of  the  contract."*^  But  if,  in  case  of  a  bill,  some  place 
where  the  drawee  is  to  be  found  to  accept  the  bill  appear  on  its 
face,  the  specific  direction  as  to  the  place  is  a  warranty  or  contract 
on  the  part  of  the  drawer  that  a  drawee  shall  be  found  at  that  place 
capable  of  accepting,  and  a  presentment  there  is  sufficient,  although 
the  place  is  closed,°*  or  the  drawee  has  never  resided  in  the  place 
named,  or  although,  if  addressed  to  a  city  or  town  generally,  his  ex- 
act place  of  residence  is  unknown.^ ^  This  last  rule  is,  however, 
disputed,  the  adverse  cases  °°  holding  that  the  drawer  should  not 
be  subjected  to  the  penalties  of  dishonor  by  the  chance  absence  of 
the  drawee  from  the  place  indicated,  but  that  the  holder  should 
make  diligent  inquiry  for  him,  and  seek  to  present  the  bill  person- 
ally before  he  protests  it.*^     However  this  may  be,  if  no  place  is  in- 

66  See  post,  pp.  841  et  seq. 

87  In  Hodge  v.  Fillis,  3  Camp.  463,  It  was  held  that,  where  a  particular 
place  of  payment  is  denoted  in  a  bill  by  both  drawers  and  acceptors,  it  is 
a  term  of  the  contract  between  the  parties,  and  that  an  averment  that  the 
bill  was  presented  there  for  payment  must  be  made.  In  Williams  v.  War- 
ing, 10  Barn.  &  C.  2,  it  was  held  that  a  memorandum,  in  the  margin  of  a 
note,  that  it  is  payable  at  a  certain  place,  is  not  to  be  considered  part  of  the 
contract,  and  presentment  at  that  place  need  not  be  averred  or  proved.  In 
Rowe  V.  Young,  2  Brod.  &  B.  165,  it  was  held  that,  where  a  bill  was  accepted 
payable  at  a  particular  place,  presentment  at  that  place  must  be  averred  in 
an  action  against  the  acceptor. 

68  Anonymous,  1  Ld.  Raym.  743;  Wolfe  v.  Jewett,  10  La.  383;  Ratcliff  v. 
Planters'  Bank,  2  Sneed,  425. 

68  Union  Bank  v.  Fowlkes,  2  Sneed,  555. 

60  Bank  of  Washington  v.  Triplett,  1  Pet  25,  34;  Wiseman  v.  Chiapella, 
23  How.  368-377. 

01  In  the  case  of  Bank  v.  Orvis,  42  Iowa,  691,  it  was  held  that,  where  tlie 


Ch.   9]  PRESENTMENT.  337 

dicated  on  the  face  of  the  bill  for  the  presentment  for  its  accept- 
ance such  presentment  may  be  made  either  to  the  drawee  per- 
sonally,®^ or,  this  being  impracticable,  first  at  his  place  of  business, 
and  then  at  his  place  of  residence,  if  that  is  known/ ^  Of  these  two 
places,  it  is  thought  that  the  place  of  business  should  be  first 
sought  out  by  the  holder,®*  and  it  is  generally  agreed  that,  if  the 
drawee's  place  of  business  or  residence  cannot  be  ascertained,  the 
holder  may  treat  the  bill  as  dishonored,  and  protest  for  non-accept- 
ance, provided,  always,  that  he  uses  due  diligence  to  ascertain 
them/^  In  case  of  presentment  for  payment,  the  rules  are  gov- 
erned by  the  same  general  principles.     These  rules  are : 

(1)  If  the  instrument  is  made  payable  at  a  particular  place,  the 
presentment  need  not  be  personal,  but  is  sufficient  if  made  at  the 
place  stipulated. 

(2)  If  no  place  of  payment  is  stipulated,  first  at  the  maker's  or 
acceptor's  place  of  business,  and  then  at  his  place  of  residence,  and 
if,  after  due  diligence,  the  maker  or  acceptor,  or  his  place  of  busi- 
ness or  of  residence,  cannot  be  found,  then  the  bill  or  note  may  be 
treated  as  dishonored. 

In  the  first  of  these  rules  the  principle  guiding  the  courts  is  that 
the  acceptor  or  maker  has  contracted  to  have  funds  to  pay  the 
instrument  when  due  at  a  particular  place,  and  this  contract  the 
indorser  has  ratified.  The  holder  has  a  right  to  rely  upon  this  con- 
maker  of  a  note  lias  no  place  of  business,  a  demand  made  at  his  place  of  resi- 
dence is  sufficient,  even  tbougli  be  is  not  at  home. 

62  Mason  v.  Franklin,  3  Johns.  201. 

63  Anderson  v.  Drake,  14  Johns.  113.  In  this  case,  Thompson,  C.  J.,  said: 
"I  am  inclined  to  think  that  where  a  note  is  not  made  payable  at  any  par- 
ticular place,  and  the  maker  has  a  known  and  permanent  residence  within 
the  state,  the  holder  is  bound  to  make  a  demand  at  such  residence  in  order  to 
charge  the  indorser." 

04  Tied.  Com.  Paper,  §  213.  "I  have  no  doubt,  where  a  person  has  an  office 
or  known  and  settled  place  of  business  for  the  transaction  of  his  monej'ed  con- 
cerns, *  *  *  a  presentment  and  demand  at  that  place  (as  well  as  a  present- 
ment and  demand  at  his  residence)  is  good  in  law."  Dayton,  J.,  in  Sussex 
Bank  v.  Baldwin,  17  N.  J.  Law,  4S8. 

65  Bateman  v.  Joseph,  12  East,  433;   Freeman  v.  Boynton,  7  Mass.  483;   Col- 
lins V.  Butler,  2  Strange,  1087;    Browning  v.   Kinuear,   1  Gow,  81;    Hine  v. 
Allely,  4  Barn.  &  Adol.  624.     In  this  case  the  bill  was  taken  to  the  proper 
place,  but  the  house  was  closed. 
NEG,  BILLS — 22 


338  PRF.SKNTMENT    AND    NOTICE    OF    DISHONOR.  [Cll.    9 

tract  in  taking  the  iustrninont,  and  therefore  his  duty  is  fulfilled  if 
he  is  ready  with  the  instrument  to  receive  payment  of  it  at  the 
place  stipulated.  The  question  involved  in  .the  second  rule  is  to 
formulate  the  degree  of  diligence  which  is  necessary  for  a  holder 
to  exercise  to  charge  an  indorser  in  endeavoring  to  procure  payment 
of  the  instrument  from  the  acceptor  or  maker.^*  And  thus  the  facts 
to  be  kept  in  mind  are  the  express  stipulation  of  contract,  in  the 
first  instance,  and,  in  the  second,  the  degree  of  diligence  necessary 
for  the  holder  to  avail  against  the  right  of  the  indorser  to  insist 
upon  a  presentment  to  hold  him  as  a  surety.  When  a  place  of 
payment  is  stipulated  in  the  bill  or  note,  presentment  for  payment 
is  sufficient  to  charge  all  parties  with  liability,  if  made  when  the 
instrument  is  due  at  the  place  stipulated.*'^  The  presentment  need 
not  be  personal.^*  The  holder's  part  of  the  contract  is  performed 
if  he,  or  any  one  for  him,  is  at  the  place  of  payment  with  the  paper, 
so  that  he  may  receive  the  money."®  The  mere  presence  of  the 
instrument  at  the  place  of  payment  is  enough.^**  By  "place  of  pay- 
ment" is  meant  either  the  particular  place  stipulated  as  an  office, 
house,'' ^  or  bank,^^  or  the  city  or  town  stipulated,''^  provided  per- 

66  "The  general  rule  that  payment  must  be  demanded  from  the  maker  of 
a  note,  and  notice  of  its  non-payment  forwarded  to  the  indorser  within  dup 
time,  in  order  to  render  him  liable,  is  so  firmly  settled  that  no  authority  need 
be  cited  in  support  of  it.  *  *  *  Due  diligence  to  obtain  payment  from  the 
maker  is  a  condition  precedent,  on  which  the  liability  of  the  indorser  depends." 
Marshall,  C.  J.,  in  Magnider  v.  Union  Bank,  S  Curt.  Dec.  299,  3  Pet.  87.  See, 
also,  Cundy  v.  Marriott,  1  Barn.  &  Adol.  69G. 

97  Harris  v.  Packer,  3  Tyrw.  370;  Saunderson  v.  Judge,  2  H.  Bl.  509;  Buxton 
V.  Jones,  1  Man.  &  G.  83;  Bank  of  the  Metropolis  v.  Brent,  2  Cranch,  C.  C, 
530,  Fed.  Cas.  No.  900;  Gale  v.  Kemper,  10  La.  205.  In  the  case  of  Saunder- 
son V.  Judge,  2  H.  Bl.  509,  it  was  held  by  the  court  that:  "It  is  not  necessary 
that  a  demand  should  be  personal.  It  is  sufficient  if  it  be  made  at  the  house 
of  the  maker  of  the  note;  and  it  is  the  same  thing,  in  effect,  if  it  be  made 
at  the  place  where  he  appoints  it  to  be  made." 

68  Nichols  V.  Goldsmith,  7  Wend.  162;    Gillett  v.  Averill,  5  Denio,  85. 

69  Woodin  V.  Foster,  16  Barb.  146. 

TO  Bank  of  Syracuse  v.  Hollister,  17  N.  Y.  46;   Merchants'  Bank  v.  Elderkln, 
25  N.  Y.  178. 
Ti  Philopott  V.  Bryant,  3  Car.  &  P.  244. 
72  Chicopee  Bank  v.  Philadelphia  Bank,  8  Wall.  641. 
7  3  Meyer  v.  Hibsher.  47  N.  Y.  265. 


Ch.    9]  PRESENTMENT.  839 

haps,  in  the  last  case,  that  the  holder  make  a  reasonable  inquiry 
for  the  acceptor's  or  maker's  address  in  the  city  or  town,  and  cannot 
find  it.^*  The  stipulation  fixing  a  place  of  payment  may  be  in 
writing,  and  created  in  a  bill,  either  by  the  drawer  making  it  pay- 
able at  a  particular  place,  or  by  like  act  of  the  acceptor,  provided 
his  acceptance  does  not  change  the  tenor  of  the  bill,^°  It  may  be 
created  in  writing  in  a  note  by  the  maker  specifying  the  place  at 
the  time  of  execution.  It  may  also  be  created  by  parol  agreement 
of  the  parties  if  it  does  not  change  a  written  stipulation  in  the 
bill  or  note.^'  And  it  may  specify  several  places,  and  designate 
any  of  them  as  the  place  of  payment  of  the  instrument.'^''  If  pay- 
ment is  to  be  made  at  any  one  of  several  places,  presentment  may 
also  be  made  at  any  one  of  them,  or  presence,  of  the  instrument  at 
any  one  of  them  is  sufficient.  This  is  because  the  aim  of  the  theory 
of  negotiability  is  to  put  the  least  possible  burden  upon  the  holder. 
This  stipulation  is  for  his  benefit.  And  the  maker  or  acceptor, 
who  is  party  to  such  a  stipulation,  must  be  ready  to  pay  the  instru- 
ment at  any  and  all  of  the  places  named  as  places  of  payment  in  it. 
When  a  bill  or  note  is  not  made  payable  at  any  particular  place, 
the  general  rule  of  law  is  that,  in  order  to  charge  the  indorser, 
payment  must  be  demanded  of  the  maker  personally,  or,  if  not  per- 
sonally, at  his  place  of  business,  or  at  his  dwelling  place  or  other  place 
of  abode.^*     This  is  a  rule  which  can  be  acted  upon  in  the  majority 

7  4  Rand.  Com.  Paper,  §  1114;  Daniel,  Neg.  Inst.  §  640. 

T5  Chalm.  Dig.  art.  166;  Foden  v.  Sharp,  4  Johns.  183;  Troy  City  Bank  v. 
Lanman,  19  N.  Y.  477;  Niagara  Dist.  Bank  v.  Tool  Manuf'g  Co.,  31  Barb.  403; 
Blair  v.  Bank  of  Tennessee,  11  Humph.  84. 

76  Thompson  v.  Ketcham,  4  Johns.  285;  Meyer  v.  Hibsher,  47  N.  Y.  205; 
Pearson  v.  Bank  of  Metropolis,  1  Pet.  89;   State  Bank  v.  Hurd,  12  Mass.  172. 

77  Beeching  v.  Gower,  1  Holt,  N.  P.  313.  This  was  a  case  where  a  banker's 
promissory  note  was  made  payable  at  Tunbridge  and  also  at  London.  The 
holder  had  a  right  to  present  it  at  either  place,  and  if  payment  were  refused 
In  Loudon  it  would  be  no  evidence  of  laches  on  the  part  of  the  holder  to  prove 
that,  if  payment  had  been  demanded  at  Tunbridge,  the  nearer  and  more  con- 
venient place,  the  bill  would  have  been  paid.  Daniel,  Neg.  Inst.  §§  648-650; 
Tied.  Com.  Paper,  §  314. 

78  Taylor  v.  Snyder,  3  Denio,  145;  Holtz  v.  Boppe,  37  N.  Y.  634;  Gates  v. 
Beecher,  GO  N.  Y.  518;  Meyer  v.  Hibsher,  47  N.  Y.  265;  Cox  v.  National  Bank, 
100  U.  S.  713;  Mitchell  v.  Baring,  10  Barn.  &  C.  11;  Barnes  v.  Vaughan,  6 
R.  I.  259;    Farmers'  Bank  v.  Duvall,  7  Gill  &  J.  (Md.)  78;    Moore  v.  Waitt,  13  N. 


340  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  [Ch.    0 

of  instances,  because  a  presentment  can  bo  made  at  one  of  these- 
places.  But  the  rule  is  not  without  oxroption.  Under  various  cir- 
cumstances, a  demand  in  any  form  may  be  dispiMised  with.  The- 
test  is  whether  due  diligence  to  make  a  demand  has  been  made,  and 
if  a  demand  is  found  to  be  impracticable,  proper  efforts  for  lliat 
purpose  having  been  made,  the  indorser  will  still  be  liable,  notice  hav- 
ing been  given  him  by  the  holder.  Instances  of  this  exception- 
are  when  the  acceptor  or  maker  has  absconded,^®  or  is  a  seaman  o» 
a  voyage,^"  or  has  no  known  place  of  residence  or  of  business,*' 
or  after  the  giving  of  the  note  or  bill,  and  before  its  maturity,  the 
maker  or  acceptor  has  removed  from  the  state  or  country.*^  In  all 
of  these  instances  a  presentment  and  demand  are  excused.  The 
reason  of  the  rule  is  due  diligence,  and,  where  no  place  of  payment 
is  stipulated  in  the  note,  due  diligence  means  what  is  consistent 
with  ordinary  business  practice.  Experience  warrants  the  positiott 
that  ordinary  business  practice  and  due  diligence  are  the  same. 

H.  415;  Sussex  Bank  v.  Baldwin,  17  N.  J.  Law,  487;  Draper  v.  Clemens,  4  Mo.. 
52.  In  the  ease  of  Barnes  v.  Vaughan,  G  R.  I.  259,  it  was  held  by  Bosworth^ 
J.,  that,  "if  no  place  of  payment  is  named  in  tho  note,  at  which  the  note  is- 
payable,  it  is  necessary  to  present  the  note  to  the  maker  personally,  or  at  his 
place  of  abode  or  business,  before  the  indorser  can  be  made  chargeable."  See, 
also,  Cheek  v.  Roper,  5  Esp.  105. 

"^9  Putnam  v.  Sullivan,  4  Mass.  45-53;  Lehman  v.  Jones,  1  Watts  &  S.  (Pa.> 
12G;   Ratcliff  v.  Planters'  Bank,  2  Sneed,  425. 

80  Barrett  v.  Wills,  4  Leigh,  114.  In  Dennie  v.  AValker,  7  N.  H.  109,  It  was 
held  by  Upham,  J.,  that  "a  removal  beyond  the  bounds  of  the  government,  after 
the  making  of  a  note,  and  before  it  comes  due,  and  where  no  place  of  payment 
of  the  note  is  specified,  renders  a  demand  upon  the  maker  unnecessary;  but 
this  is  an  exception  to  the  general  rule,  and  must  be  construed  strictly." 

siWhittier  v.  Graffam,  3  Greenl.  82;  Duncan  v.  McCullough,  4  Serg.  &  R. 
486.  "If  the  maker  has  no  known  residence  or  place,  the  holder  will  be  ex- 
cused from  making  any  demand  whatever.  So,  If  in  the  intermediate  period' 
between  the  time  when  the  note  was  made  and  when  it  becomes  due  the  maker- 
has  removed  his  domicile  or  place  of  business  to  another  state.  *  *  *  It 
will,  in  such  case  be  sufficient  to  present  the  note  at  his  former  residence  or 
place  of  business."  Per  Wright,  J.,  in  Adams  v.  Leland,  30  N.  Y.  309.  To  the- 
same  effect,  see  Erwin  v.  Adams,  2  La.  318;   Sands  v.  Clarke,  8  C.  B.  751. 

8  2  McG ruder  v.  Bank  of  Washington,  9  Wheat.  598;  Gillespie  v.  Hannahan,^ 
4  McCord,  503;  Reid  v.  Morrison,  2  Watts  &  S.  401;  Wheeler  v.  Field,  G  Mete, 
(Mass.)  290;  Central  Bank  v.  Allen,  16  Me.  41;  Grafton  Bank  v.  Cox,  13  Gray^ 
503. 


C'll.    0]  PRESENTMENT.  341 

Where  no  place  of  presentment  or  payment  is  specified,  due  diligence 
would  require  that  the  instrument  be  presented  where  there  might 
be  supposed  to  be  some  one  to  care  for  it.®^ 

The  foregoing  general  statements  as  to  the  place  of  presentment 
are  to  be  qualified  by  the  other  statement  that  their  main  impor- 
tance is  in  their  application  to  the  enforcement  of  the  contract  of  the 
drawer  or  indorser.  A  failure  to  present  does  not  relieve  the  ac- 
ceptor or  maker  from  the  principal  debt,  but  does  discharge  the 
drawer  and  indorsers.  His  liability  as  a  surety  is  strictissimi  juris, 
and  must  be  enforced  according  to  the  letter  of  the  contract.  The 
4ue  diligence  the  holder  owes  to  him  is  only  satisfied  by  presentment 
at  the  place  where  it  is  to  be  presumed  that  funds  have  been  pro- 
vided to  meet  the  bill  or  note  at  maturity.^*  And,  if  no  place  is 
specified,  then  a  reasonable  effort  on  the  part  of  the  holder  to  collect 
the  paper  of  the  maker  or  acceptor  in  ways  which  the  law  itself 
has  prescribed  and  pointed  out.  This  topic  will  be  amplified  in  a 
subsequent  section  of  this  chapter. 


SAME— BY  WHOM  AND  TO  WHOM  MADE— EFFECT  OF  FAIL- 
URE TO  PRESENT  AND  PROTEST. 

141.  Presentment  must  be  made  by  the  la^vful  holder, 
or  his  authorized  agent,  to  the  dra\«ree,  acceptor,  or  maker, 
or  his  authorized  agent. 

143.  A  failure  to  make  due  presentment  for  acceptance, 
"when  it  is  incumbent  on  the  holder  to  make  the  same,  de- 

83  Woodworth  v.  Bank  of  America,  19  Johns.  391;  Meyer  v.  Hibsher,  47  N. 
Y.  2G5. 

84  Bank  of  U.  S.  v.  Smith,  11  Wheat.  171;  Watkins  v.  Crouch,  5  Leigh,  522; 
Ferner  v.  Williams,  37  Barb.  9;  Parker  v.  Stroud,  98  N.  Y.  379;  Brown  v. 
Jones,  113  Ind.  46,  13  N.  E.  857.  Where  a  bill  is  drawn  payable  at  a  particular 
place,  and  the  drawee  accepts  it  payable  at  that  place,  in  an  action  against 
the  drawer,  presentment  to  the  acceptor  at  that  place  must  be  proved.  Gibb 
V.  Mather,  8  Bing.  214.  An  acceptance  which  makes  a  bill  payable  at  a  dif- 
ferent place  from  that  in  which  the  drawee  has  his  residence  is  a  material 
departure  from  the  tenor  of  the  instniment,  and  presentment  for  payment  at 
the  place  in  which  it  is  made  payable  by  the  acceptance,  will  not  charge  the 
drawer.  Niagara  Bank  v.  Falrman  &  W.  Mach.  Tool  Manuf'g  Co.,  31  Barb. 
<N.  Y.)  403. 


342  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  [Ch.    9 

prives  him  of  his  remedy  both  on  the  bill  itself  and  on 
the  consideration  for  -which  it  -was  given. 

143.  A  failure  to  present  a  bill  or  note  for  payment  at 
the  proper  place  or  time — 

(a)  Relieves  the  acceptor  or  maker  from  payment  of 

further  interest  and  costs  of  suit,  if  he  -was  ready 
■with  funds  to  meet  the  bill  or  note  at  the  stipu- 
lated time  and  place  of  payment,  but  not  from 
the  principal  sum  of  the  bill  or  note. 

(b)  It   discharges   the   drawer  and  indorsers  from  lia- 

bility. 

144.  Upon  presentment  of  a  bill  for  acceptance,  or  of  a 
bill  or  note  for  payment,  and  a  refusal  to  accept  the  bill 
or  to  pay  the  bill  or  note,  notice  of  its  dishonor  must  be 
given  to  the  dra-wer  of  the  bill,  and  to  the  indorsers  of 
the  bill  or  note.  It  is  usual  to  protest  it,  though  this  is 
necessary  only  -with  foreign  bills. 

In  concluding  the  subject  of  "Presentment,"  and  before  taking 
up  the  subject  of  "Dishonor,"  it  remains  to  mention  the  person  to 
whom  and  by  whom  a  bill  may  be  presented  for  acceptance,  or  a 
bill  or  note  may  be  presented  for  payment,  the  effect  of  the  failure 
of  the  holder  to  present  the  instrument  for  acceptance  and  for 
payment,  and  the  proceeding  proper  to  be  followed  in  case  accept- 
ance or  payment  is  refused. 
By  Whom. 

Presentment  should  be  made  by  the  lawful  holder  or  by  his  duly- 
authorized  agent.^®  The  meaning  of  "a  lawful  holder"  is  deter- 
mined by  principles  already  given.^'  Where  the  instrument  is  pay- 
able to  bearer  or  indorsed  in  blank,  both  in  case  of  presentment 

8  6  Bank  of  Utica  v.  Smith,  18  Johns.  230;  Freeman  v.  Boynton,  7  Mass.  483; 
Agnew  V.  Bank  of  Gettysburg,  2  Har.  &  G.  478;  Leftley  v.  Mills,  4  Term  B. 
170;  Bachellor  v.  Priest,  12  Pick.  399;  Sussex  Bank  v.  Baldwin,  17  N.  J.  Law, 
487.  Thus,  in  the  case  of  Ocean  Bank  v.  Williams,  102  Mass.  141-143,  it  was 
held  that  a  pi-esentment  and  demand  of  payment  made  by  a  notary's  clerk  or 
deputy  was  not  sufficient 

88  See  supra,  pp.  180  et  seq. 


Ch.   9]  PRESENTMENT.  343 

for  acceptance  and  of  presentment  for  payment,  the  rule  is  that 
the  drawee  in  case  of  acceptance,  and  the  acceptor  or  maker  in 
case  of  pjiyment,  is  bound  to  consider  the  person  in  possession  of 
the  bill  or  note,  with  the  ostensible  legal  title  to  it,  as  the  person 
lawfully  entitled  to  make  the  presentment  and  demand.  This  os- 
tensible legal  title  is  shown  by  the  possession  of  the  instrument. 
Where  the  instrument  is  indorsed  in  full,  for  reasons  already  given,  it 
must  be  presented  by  the  indorsee.  Where,  however,  the  instrument 
is  unindorsed  by  the  payee  or  indorsed  in  full,  and  not  in  the  posses- 
sion of  the  indorsee,  then  the  person  to  whom  it  is  presented  is  put 
upon  his  inquiry.  If,  without  inquiry,  he  accepts  and  pays,  it  is 
at  the  risk  of  repayment,  if  he  does  not  pay  the  true  owner.  The 
possessor  certainly  cannot  be  deemed,  as  is  sometimes  said,*^  to  be 
the  agent  of  the  true  owner  by  virtue  of  his  possession.^*  Though 
this  last  position  is  modified  by  the  rule  that  if  it  appears  conclu- 
sively that  the  omission  to  indorse  was  through  inadvertence,  and 
that,  although  not  indorsed,  the  instrument  was  transferred  to  the 
holder  before  maturity,  for  a  valuable  consideration,  then  such  an 
instrument  is  in  the  possession  of  some  party  from  whom  it  is 
proper  to  accept  it,  or  to  whom  it  is  proper  to  pay  it.*" 

The  agent  making  the  presentation  is  generally,  but  not  neces- 
sarily, a  notary  public.  A  notary  public  is  chosen  to  make  pre- 
sentment for  purpose  of  protest.  The  distinction  between  pre- 
sentment and  protest  is  that  presentment  is  the  placing  the  bill 
so  that  those  liable  upon  it  can  have  it  at  hand  to  accept  it  or 
to  pay  it  when  due,  but  protest  is  an  oflScial  act,  held  necessary 
in  case  of  foreign  bills  to  charge  the  indorsers.  Any  person  who 
is  the  lawful  holder  of  the  instrument  may  make  a  presentment. 
And  while  it  is  also  true  that  any  reputable  citizen,  in  the  absence 
of  a  notary  public  in  the  town  or  place,  may  make  a  protest,  never- 
theless the  custom  is  practically  limited  to  notaries  public,  because 
it  is  only  the  certificates  or  manifests  of  notaries  public  which  by 
the  statutes  of  the  several  states  have  been  declared  to  be  prima 
facie  evidence  of  the  facts  contained  in  them.°°     But,  aside  from  the 

87  Daniel,  Neg.  Inst.  §  573. 

8  8  Donbleday  v.  Kress,  50  N.  Y.  413. 

80  Franklin  Bank  v.  Raymond,  3  Wend.  G9. 

00  In  the  case  of  Langenbei'ger  v.  Kroeger,  48  Cal.  149.  it  was  beld  that, 


344  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  [Cll.   9 

fact  of  protest,  any  person  duly  authorized  may  make  a  present- 
ment,®^ although  it  is  doubtful,  in  ease  of  payment  of  an  instru- 
ment specially  indorsed,  whether  or  not  the  maker  or  acceptor  may 
require  a  written  authority  or  an  indorsement  to  the  agent  before 
being  compelled  to  make  payment.®* 
To  Whom. 

Subject  to  the  provisions  stated  in  the  last  sections  of  this  chapter, 
a  presentment  must  be  made  to  the  drawee  or  acceptor  of  a  bill, 
or  to  the  maker  of  a  note,  or  to  an  authorized  agent."  ^  In  case  of 
acceptance,  the  presentment  must  be  made  to  the  drawee  in  per- 
son, if  he  be  alive  and  can  be  found.®*  If  he  cannot  be  found, 
then  inquiry  should  be  made  for  some  person  authorized  to  accept 
for  him,  though  it  should  be  always  kept  in  mind  that  it  is  in- 
f  cumbent  on  the  plaintiff  to  prove  that  the  agent  was  authorized 
to  accept  or  refuse  acceptance.®^  If  the  drawee  is  dead,  the  better 
opinion  is  that  at  once  there  may  be  a  protest  for  non-acceptance.®* 
In  case  of  presentment  for  payment,  if  there  is  a  stipulation  for 
the  payment  of  the  instrument  at  any  particular  place,  present- 
ment should  be  made  to  the  drawee,  acceptor  or  maker,  if  he  is 
to  be  found  at  the  place  of  payment;  if  not,  then  presentment  should 
be  made  to  any  person  of  discretion  who  can  be  found.    It  is  the 

where  it  was  not  specified  in  the  instrument  in  what  kind  of  money  the  draft 
was  payable,  a  demand  for  payment  in  gold  would  not  charge  the  d^-awer. 

91  Merchants'  Bank  v.  Spicer,  6  Wend.  443;  Baer  v.  Leppert,  12  Hun,  516; 
Hartford  Bank  v.  Barry,  17  Mass.  M;  Shed  v.  Brett,  1  Pick.  401,  413;  Seaver 
V.  Lincoln,  21  Pick.  267;  Hartford  Bank  v.  Stedman,  3  Conn.  480. 

9  2  See  Tied.  Com.  Paper,  §  311,  and  cases  cited.  Contra,  Daniel.  Neg.  Inst. 
§  572,  and  cases  cited. 

93  In  the  case  of  Brown  v.  Turner,  15  Ala.  832,  it  was  held  that,  where  a 
bill  was  accepted  by  two  partners,  demand  of  payment  made  of  the  agent  of 
one  of  them,  in  the  absence  from  the  city  of  both  partners,  was  sufficient  to 
charge  the  drawer. 

9  4  Cheek  v.  Roper,  5  Esp.  175.  In  this  case  it  was  held  that,  in  order  to 
charge  the  drawer  of  an  unaccepted  bill,  some  actual  evidence  of  a  demand  to 
accept  on  the  drawee  must  be  proved.  It  is  not  sufficient  to  call  at  the  res- 
idence of  the  drawee,  and  for  an  acceptance  to  be  refused  by  a  person  who  was 
unknown  by  the  one  making  the  demand. 

9  5  Nelson  v.  Fotterall,  7  Leigh,  180;  Stainback  v.  Bank  of  "Virginia,  11  Grat. 
260. 

»c  Tioil.  Com.  Paper,  §  212;    Daniel,  Xeg.  Inst.  §  459. 


Ch.  9]  PRESENTMENT,  345 

duty  of  the  acceptor  or  maker  to  have  funds  at  that  place,  and  a 
person  on  the  premises  who  may  be  reasonably  supposed  to  know 
of  them  or  to  have  charge  of  them  is  a  proper  person  to  whom  to 
make  a  presentment.^^  If  no  place  is  stipulated,  then  presentment 
must  be  made  either  to  the  acceptor  or  maker  personally,  or  at 
his  place  of  business  or  of  residence,  for  reasons  already  given.®* 
And  in  making  presentment  in  these  ways  the  principles  enunciated 
also  apply.  If  the  maker  or  acceptor  is  dead,  presentment  should 
be  made  to  his  personal  representative,  if  one  can  be  found.®*  But 
if  none  has  been  appointed,  then  at  the  acceptor's  or  maker's  for- 
mer place  of  residence.^"" 
Effect  of  Failure  to  Present. 

A  failure  to  present  for  acceptance  is,  in  general,  unimportant.^"^ 
But  in  case  of  bills  payable  at  or  after  sight,  transferred  as  col- 

87  Matthews  v.  Haydon,  2  Esp.  509;  Sanford  v.  Norton,  17  Vt.  2S5;  Draper 
▼.  Clemens,  4  Mo.  52;  Phillips  v.  Poindexter,  18  Ala.  579;  Bank  of  England 
V.  Newman,  12  Mod.  241.  In  this  case  it  was  held  that  a  demand  of  a  servant 
of  the  drawer,  who  used  to  pay  money  for  him,  was  a  good  demand.  WhaJey 
y.  Houston,  12  La,  Ann.  585. 

»8  See  supra,  pp.  336  et  seq.  In  the  case  of  Barnes  v.  Vaughan,  6  R.  I.  259,  no 
place  was  named  in  the  note  in  question,  and  it  was  held  that  payment  must 
be  demanded  from  the  maker  In  person,  or  at  his  place  of  business  or  resi- 
dence; on  the  last  day  of  grace.  A  notice  sent  by  the  bank  where  a  note  has 
been  left  for  collection,  stating  the  fact  that  the  bank  holds  the  note,  and 
stating  the  day  of  payment,  and  given  before  maturity,  is  not  a  sufficient 
■demand. 

8  9  Magruder  v.  Union  Bank,  3  Pet.  87.  The  decision  in  this  case  was  to  the 
effect  that  the  fact  that  the  indorser  of  a  note  took  out  letters  of  adminstra- 
tion  on  the  estate  of  the  maker,  who  died  before  it  became  due,  did  not  free 
the  holder  from  the  duty  of  demanding  payment,  and  of  giving  notice  to  the 
indorser.  Gower  v.  Moore,  25  Me.  IG;  Juniata  Bank  v.  Hale,  16  Serg.  &  R. 
167.  In  this  case  the  maker  of  the  note  was  shown  to  have  died  before  it 
became  due.  Letters  of  administration  upon  the  estate  were  taken  out  by  the 
indorsers,  among  others,  before  maturity  of  the  note.  It  was  held  that,  not- 
withstanding these  facts  notice  of  the  maker's  non-payment  must  be  given  to 
the  indorsers.    Groth  v.  Gyger,  31  Pa.  St.  271. 

100  Magruder  v.  Union  Bank,  3  Pet.  87;  Juniata  Bank  v.  Hale,  16  Serg.  & 
R.  167;   Price  v.  Young,  1  Nott  &  McC.  438;  Gower  v.  Moore,  25  Me.  16. 

i"i  See  supra,  pp.  321  et  seq. 


346  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  [Ch.   9 

lateral  security,*"-  or  in  payment  of  the  lioldcr's  debt,**"  present- 
ment for  acceptance  is  vital.  For,  as  has  been  seen,*"*  it  is  the 
duty  of  the  holder  of  such  bills  either  to  negotiate  them  away  or 
to  present  them  for  acceptance  within  a  reasonable  time,  else  the 
drawer  and  prior  indorsers  are  discharged.*"'^  This  duty  binds  the 
transferee,  and  he  must  in  turn  present  the  paper  for  acceptance 
or  negotiate  it  away.  Hence  the  rules  already  given* "^  do  not  apply 
to  such  a  transferee,  and  he  is  not  allowed  to  treat  the  instru- 
ment as  a  suspension  of  the  indebtedness,  and  to  sue  upon  the 
original  consideration,  upon  returning  to  the  debtor  the  bill,  from 
which  the  drawer  and  indorser  are  discharged  by  reason  of  his  own 
negligence.  He  has  made  the  paper  his  own  so  as  to  substitute 
the  parties  to  it  his  debtors  in  place  of  his  original  debtor,  and 
he  has  discharged  the  original  debtor  from  all  liability,  whether 
the  paper  is  in  fact  paid  or  not.*"^  The  loss  must  fall  upon  his  shoul- 
ders, and  not  that  of  the  debtor,  for  a  bill  rendered  nugatory  iu 
many  of  its  important  particulars  is  treated  as  a  discharge  or 
payment  of  the  original  debt.  This  rule  applies  also  in  case  of  the 
laches  of  the  original  creditor  in  presenting  for  payment  a  bill  or 
note  transferred  to  him  by  his  debtor,  or  in  obtaining  the  payment 
of  instruments  so  transferred  in  ways  from  which  loss  or  injury 
ensue.**" 

102  Dayton  v.  Trull.  23  Wend.  345. 

103  In  the  case  of  Smith  v.  Miller,  43  N.  Y.  174,  It  was  held  by  Allen,  J.,  that 
"a  creditor  may  so  deal  with  negotiable  securities  received  from  his  debtor 
for  collection,  and  to  be  placed  to  his  credit  when  paid,  as  to  discharge  the 
debtor  from  all  liability.  *  *  *  Laches  which  would  discharge  the  drawer 
or  indorser  of  a  bill  of  exchange  will  as  effectually  extinguish  the  debt  for 
payment  of  which  a  bill  or  other  negotiable  instrument  is  transferred." 

104  See  supra,  pp.321  et  seq. 

lojsMellish  v.  RaAvdon,  9  Bing.  416;  Ramchum  v.  Radakissen,  9  Moore,  P. 
C.  4G;  Wallace  v.  Agry,  4  Mason,  336,  Fed.  Cas.  No.  17,096;  Strong  v.  King, 
35  111.  9;  Goupy  v.  Harden,  7  Taunt.  163.  In  Goupy  v.  Harden  it  was  held  by 
Gibbs,  C.  J.,  that  there  was  no  laches  in  putting  a  foreign  bill  payable  after 
sight,  into  circulation  before  acceptance  and  to  keep  it  circulating  so  long  as 
the  convenience  of  the  successive  holders  requires. 

106  See  supra,  pp.  321  et  seq. 

107  People  V.  Cromwell,  102  N.  Y.  477,  7  N.  E.  413;  Smith  v.  Miller,  43  N. 
Y.  171;    South  wick  v.  Sax,  9  Wend.  122. 

108  Jones  V.  Savagu.  6  Wend.  G5S;   Tobey  v.  Barber,  5  Johns.  68;   Chamber- 


Ch.    y]  PRESENTMENT.  347 

Tlie  principal  point  of  importance  to  be  noted  in  tlie  case  of  the 
failure  of  tlie  holder  to  present  a  bill  or  note  for  payment  at  the 
proi)er  place  or  time  is  the  difference  in  its  effect  upon  the  con- 
tract of  the  acceptor  and  maker,  and  that  of  the  drawer  and  in- 
dorsers.  As  far  as  the  maker  and  acceptor  are  concerned,  the 
place  and  time  of  payment  embodied  in  an  instrument  are  looked 
upon  merely  as  memoranda  of  the  place  where  and  time  when  pay- 
ment is  to  be  demanded,  and  not  as  part  of  the  contract  other- 
wise essential.  The  maker  or  acceptor  is  liable  everywhere  and 
at  all  times  within  the  statute  of  limitations,  and,  as  against  him, 
the  bringing  of  the  action  is  a  sufficient  demand.^"®  The  right  of 
action  always  subsists  so  long  as  the  instrument  is  unpaid.  The 
place  and  time  of  payment,  however,  are  so  far  important  that,  if 
the  maker  or  acceptor  were  there  then,  with  his  money  to  pay 
the  instrument,  it  is  looked  upon  much  as  a  tender  would  be  in 
the  case  of  an  ordinary  debt.  The  holder  may  recover  from  him 
at  any  time  the  amount  of  the  instrument,^  ^°  but  not  interest,  by 
way  of  damages,  for  his  failure  to  pay.^^^  In  other  words,  the 
non-attendance  of  the  holder  with  the  instrument  at  the  time  and 
place  of  payment  can  produce  no  worse  consequences  to  him  than 
if  he  had  attended,  and  the  acceptor  or  maker  had  also  been  pres- 
ent, and  tendered  the  money,  which  the  holder  had  refused  to 
accept.^ ^^  Of  course,  with  this  must  be  coupled  the  other  principle 
governing  the  law  of  tender, — that,  for  the  maker  or  acceptor  to 
preserve  his  rights,  the  tender  must  be  kept  good.     The  funds  must 

lyn  V.  Delarive,  2  Wils.  353;  Hebden  v.  Hartsink,  4  Esp.  46;  Camidge  v. 
Allenby,  6  Bam.  &  C.  373;  Adams  v.  Darby,  28  Mo.  162;  Grade  v.  Sandfor'd, 
9  Ark.  238.  In  Kearslake  v.  Morgan,  5  Term  R.  513,  it  was  beld  that  a  plea 
In  assumpsit  tliat  tlie  defendant  (who  was  the  payee  of  a  promissory  note) 
indorsed  it  to  the  plaintiff  "for  and  on  accoimt  of"  the  said  debt  was  good. 

109  Rhodes  V.  Gent,  5  Barn.  &  Aid.  244;  Jackson  v.  Packer,  13  Conn.  342; 
Armstrong  v.  Caldwell,  2  111.  546;  Chillicothe  Branch  of  State  Bank  v.  Fox, 
3  Blatchf.  431,  Fed.  Cas.  No.  2,G83;  Blair  v.  Bank  of  Tennessee,  11  Humph. 
83;    Wegersloffe  v.  Keene,  1  Strange,  222;    Rice  v.  Hogan,  8  Dana,  134. 

110  Bacon  v.  Dyer,  12  Me.  19;  Armistead  v.  Armistead,  10  Leigh,  525;  Mul- 
herrin  v.  Hannum,  2  Yerg.  81;  Hills  v.  Place,  48  N.  Y.  520;  Lazier  v.  Horan, 
55  Iowa,  75,  7  N.  W.  457. 

111  Phillips  V.  Franklin,  Gow,  19G;  Murray  v.  East  India  Co.,  5  Barn.  &. 
Aid.  204. 

112  Hills  V.  Place,  48  N.  Y.  520. 


548  PRESENTMENT   AND    NOTICE   OF    DISHONOR.  [Cll.   9 

be  kept  at  the  place  of  payment  to  pay  the  instrument  at  any  time; 
for  if  the  holder  make  a  special  demand  afterwards,  and  the  in- 
strument be  not  paid,  then  his  rights  revive,  and  he  becomes  en- 
titled to  interest  or  damages  from  the  time  of  the  demand  and 
also  his  costs  of  suit.  This  general  rule  does  not  apply  to  the 
drawer^^'  or  indorser.^^*  He  is  not  the  principal  debtor,  but  only 
a  surety,  whose  liability  is  dependent  upon  the  strict  performance 
of  the  contract  by  the  holder."'  The  place  and  time  of  paynient 
for  him  are  an  essential  part  of  the  contract.  The  indorser  is  en- 
titled to  be  at  once  apprised  of  the  default  of  the  maker,  so  that 
he  may  protect  himself,  both  from  the  payment  of  interest  as  dam- 
ages and  of  costs,  by  taking  up  the  bill  or  note  himself,  and  further 
may  take  steps  to  protect  himself  as  against  prior  indorsers.  The 
liolder  of  the  bill  or  note  is  held  to  a  most  strict  compliance  with 
its  terms.  Presentment  either  the  day  before  or  the  day  after 
the  instrument  became  due  will  not  avail.  The  loss  or  want  of  one 
4ay  is  ^^'  a  palpable  want  of  due  diligence,  which  discharges  the 
indorser. 

Notice  of  Dishonor. 

After  presentment  for  acceptance  or  payment  has  been  made  and 
refused,  notice  of  dishonor  must  at  once  be  given  to  the  drawer  and 
indorsers;  otherwise  they  are  discharged.  The  reason  of  the  rule 
that  a  failure  to  give  the  drawer  and  indorsers  notice  of  non-accept- 
ances discharges  them  is  that  these  parties  may  take  prompt  meas- 
ures of  self-protection ;  the  drawer  by  withdrawing  or  withholding 
the  further  accumulation  of  effects  in  the  hands  of  the  drawee,  and 
the  indorsers  by  obtaining  payment  from  the  parties  respectively 
liable  to  them.^^'  The  reason  for  the  rule  that  failure  to  give  a 
drawer  and  indorsers  notice  of  non-payment  discharges  them  is 

113  Munroe  v.  Easton,  2  Johns.  Cas.  75;   Bunitt  v.  Tidmarsh,  5  111.  App.  341. 

114  Magruder  v.  Union  Bank,  3  Pet  87;  Ruddell  v.  Walker,  7  Ark.  457; 
Vanwickle  v.  DoAvning,  19  La.  Ann.  83;  Duncan  v.  McCollougb,  4  Serg.  &  R. 
480;  Brandt  v.  Mickle,  28  Md.  436;  Bank  of  Alexandria  v.  Young,  2  Cranch, 
C.  C.  52,  Fed.  Cas.  No.  858. 

iiswolcott  V.  Van  Santvoord,  17  Johns.  247;  Parker  v.  Stroud,  98  N.  Y. 
210. 

1 1 8  Johnson  v.  Haight,  13  Johns.  470. 

117  Edw.  Neg.  Inst.  §  619;    Stewart  v,  Millard,  7  Lans.  373. 


Cll.   9]  PRESENTMENT.  349^ 

partly  that  given  in  the  last  paragraph,  and  partly  because  the  con- 
tract of  the  drawer  or  indorser,  as  construed  by  the  law  merchant, 
depends  upon  two  conditions,  which  are  conditions  precedent  to  the 
right  of  enforcement  of  the  bill  or  note  against  the  drawer  or  in- 
dorser. These  are  presentment  to  the  drawee,  acceptor,  or  maker, 
and  a  refusal  on  his  part  to  pay,  and  secondly  due  notice  to  the 
drawer  or  indorser.^ ^®  If,  therefore,  the  holder  fails  to  give  the 
drawer  or  indorser  due  notice  of  non-payment,  he  fails  to  perform  a 
condition  precedent  to  his  right  of  recovery  upon  the  bill,  and  can- 
not enforce  its  payment  against  the  parties  who  had  a  right  to  its 
performance.  And  this  discharge  acquits  the  drawer  and  indorser 
both  of  his  liability  upon  the  bill  or  note,  and  of  his  liability  upon 
the  consideration  for  its  transfer.  For,  as  was  shown  in  case  of 
failure  to  present  for  acceptance,  the  holder,  by  his  neglect,  has 
made  the  bill  or  note  his  own,  and  loss  because  of  this  neglect  will 
fall  upon  him.^^' 
Protest. 

A  usual  preliminary  to  giving  notice  of  dishonor  of  bill  or  note  is 
its  protest.     A  protest  is  defined  as  in  form  a  solemn  declaration 

118  Musson  V.  Lake,  4  How.  (U.  S.)  262;   Rothschild  v.  Currie,  1  Q.  B.  43. 

119  Jones  V.  Savage,  6  Wend.  G59;  Woodcock  v.  Bennet,  1  Cow.  711;  Bridges- 
V.  Berry,  3  Taunt.  130.  In  this  case  the  defendant  was  irnable  to  pay  a  bill 
when  due,  which  he  had  accepted.  He  obtained  time,  and  indorsed  to  the 
plaintiff,  as  a  security,  a  bill  drawn  by  himself  to  his  own  order,  which,  when 
due,  was  dishonored  by  the  drawee,  but  the  holder  omitted  to  give  the  defend- 
ant notice.  It  was  held  that  by  this  laches  the  defendant  was  discharged, 
not  only  as  indorser  of  the  one  bill,  but  also  as  acceptor  of  the  other.  In  Pea- 
cock V.  Pursell,  14  Q.  B.  (N.  S.)  728,  it  was  held  that  where  A  received  from 
B,  as  collateral  security  for  a  debt,  a  bill  drawn  by  C  upon  D,  and  at  ma- 
turity failed  to  present  it,  he,  by  his  laches,  made  the  bill  equivalent  to  pay- 
ment, as  between  A  and  B.  Where  one  drew  a  bill  of  exchange  on  a  person 
to  whom  he  had  shipped  goods  on  his  own  accoimt,  he  is  entitled  to  notice  of 
dishonor,  although  in  fact  the  drawee  had  not  received  the  goods  when  the 
bill  was  presented  for  acceptance.  Rucker  v.  Hiller,  16  East,  43.  Brown  v. 
Cronise,  21  Cal.  3S6;  Green  v.  Cummins  (Ky.)  6  Reporter,  524;  Jennison  v. 
Parker,  7  Mich.  355;  Stam  v.  Kerr,  31  Miss.  199;  Gale  v.  Walsh,  5  Term  R. 
239;  Peacock  v.  Pm-sell,  14  Q.  B.  (N.  S.)  728;  Rucker  v.  Hiller,  16  East,  43,  3 
Camp.  217.  In  Gale  v.  Walsh,  5  Term  R.  239,  it  was  held  that,  in  an  action 
against  the  drawer  of  a  foreign  bill  of  exchange,  a  protest  for  nonacceptauce 
must  be  proved. 


350  rRESEXTMRXT    AND    NOTICE    OF    DISHONOR.  [Ch.   9 

written  by  a  notary  under  a  fair  copy  of  the  bill  or  note,  stating 
that  acceptance  or  payment  has  been  demanded  and  refused;  the 
reasons  for  such  refusal,  if  any,  are  assigned;  and  that  the  bill  or 
note  is  therefore  protested.'-"*  Its  popular  signification  includes 
all  the  steps  taken  to  fix  the  liability  of  a  drawer  or  indorsers,^^^ 
but  its  accurate  technical  meaning  is  that  it  is  the  testimony  of 
some  proper  person,  usually  a  notary,  that  the  regular  legal  steps 
to  fix  that  liability  have  been  taken  by  the  holder.^^^  Its  method 
is  for  the  notary  to  himself  properly  present  the  instrument,  and 
demand  its  acceptance  or  payment.  If  these  are  refused,  to  make 
a  minute  thereof  on  the  instrument,  or  in  his  official  record;  the 
minute  consisting  of  his  initials,  the  year,  month,  and  day  of  dis- 
honor, and  his  charges.  This  is  done  on  the  day  of  the  dishonor.^" 
And  on  the  same  day,  or  afterwards,  the  notary  extends  the  protest 
thus  noted  by  embodying  in  a  certificate  the  facts  of  the  protest, 
and  his  acts  in  making  presentment,  demand,  and  in  giving  notice 
of  dishonor.  To  this  he  generally  appends  his  official  seal.^^*  This 
certificate  is  generally  accepted  as  evidence  of  the  facts  set  forth  in 
its  terms,  and  its  production  obviates  the  necessity  of  proof  of  these 
facts  by  witnesses  in  open  court.  The  main  purpose  of  the  protest, 
therefore,  is  to  furnish  to  the  holder  legal  testimony  of  presentment, 
demand,  and  notice  of  dishonor,  to  be  used  in  actions  against  the 

120  Byles,  Bills,  p.  2G3. 

121  Townsend  v.  Lorain  Bank,  2  Ohio  St.  345;  Wolford  v.  Andrews.  29 
Minn.  251,  13  N.  W.  1G7. 

122  Ocoee  Bank  v.  Hughes,  2  Cold.  (Tenn.)  52. 

123  In  the  case  of  Chaters  v.  Bell,  4  Esp.  48,  Lord  Kenyon  was  of  the  opin- 
ion that  protest  might  be  made  at  a  futui'e  time,  if  a  bill  were  regularly  pre- 
sented and  noted  at  the  time  of  demand  and  refusal  of  payment.  It  was  said 
by  Grier,  J.,  in  Dennistoun  v.  Stewart,  21  Curt.  722,  17  How.  606,  that  "a  pro- 
test, though  necessary,  need  only  be  noted  on  the  day  on  which  payment  was 
refused.  It  may  be  drawn  and  completed  at  any  time  before  the  commence- 
ment of  the  suit,  or  even  before  the  trial,  and  consequently  may  be  amended 
according  to  the  truth,  if  any  mistake  has  been  made.  The  copy  of  the  bill  is 
connected  with  the  bill  certifying  the  formal  demand  by  the  public  officer,  as 
the  easiest  and  best  mode  of  identifying  it  with  the  original." 

124  Daniel,  Neg.  Inst.  §  927.  For  detailed  statement  of  protest,  and  authori- 
ties, see  Byles,  Bills,  c.  19;  Daniel,  Neg.  Inst  c.  28;  Rand.  Com,  Paper,  c 
34;   Tied.  Com.  Paper,  c.  17. 


Ch.    9]  PRESENTMENT.  351 

drawer  and  indorsers.*^"     And  this  purpose  is  the  reason  for  the 
following  rules: 

(1)  A  foreign  bill  must  be  presented  by  a  notary  public,^ ^°  be- 
cause, from  the  needs  of  the  ease,  some  act  of  a  universally  recog- 
nized authority  is  called  for.  By  force  of  custom,  the  offlcial  act  of 
the  notary  public  is  of  recognized  authority  throughout  the  world. 
It  is  deemed  to  afford  satisfactory  evidence  of  dishonor  to  the 
drawer  and  indorsers,  who  from  their  residence  abroad  might  ex- 
perience a  difficulty  in  making  proper  inquiries  on  the  subject,  and 
be  compelled  to  rely  on  the  representation  of  the  holder.  By  the 
common  law,  also,  in  case  of  a  foreign  bill,  a  notary's  protest  is 
competent  evidence  of  such  fact,  alike  in  cases  of  protests  for  non- 
acceptance  or  non-payment  and  for  better  security.^ ^^ 

(2)  Protest  by  notaries  public  of  a  foreign  note  is  unnecessary, 
unless  it  is  indorsed;  but,  if  indorsed,  its  protest  by  a  notary 
public,  according  to  the  weight  of  authority,  is  required,  because  the 
indorsement  of  a  note  is  essentially  a  bill  drawn  on  the  maker.^^* 

(3)  An  inland  bill  or  promissory  note,  whether  inland  or  foreign, 
provided  it  be  unindorsed,^^®  not  being  originally  within  the  rules  of 
the  law  merchant,  is  not  subject  to  the  operation  of  this  rule. 
Statutes  in  most  of  the  states  have,  however,  sanctioned  the  prac- 
tice of  a  notary  public's  presenting  the  paper  by  putting  his  cer- 
tificate on  the  same  footing  with  that  of  a  notary  public  presenting 
a  foreign  bill  of  exchange.  It  is  true,  also,  that  in  case  of  inland 
bills  and  promissory  notes,  it  is  a  common  practice  for  a  notary 
public  to  be  employed  to  make  demand  of  payment  of  inland  bills 
and  promissory  notes  from  the  acceptors  and  makers,  and  also  to 
give  notice  of  the  dishonor  to  the  indorsers  thereon.     But  this  is  a 

128  Swayze  v.  Britton,  17  Kan.  629;  Walker  y.  Turner,  2  Grat.  536;  Com- 
mercial Bank  v.  Varnum,  49  N.  Y.  269;  Halliday  v.  McDougall,  20  Wend.  80; 
Dennistoun  v.  Stewart,  17  How.  (U.  S.)  606. 

126  Union  Bank  v.  Hyde,  6  Wlieat.  572;  Borough  v.  Perkins,  1  Salk.  131; 
2  Ld.  Raym.  992;  Carter  v.  Union  Bank,  7  Hiunph.  548.  As  to  whetlier  de- 
mand of  payment  of  a  foreign  bill  may  be  made  by  a  notaiy's  deputy,  see  Car- 
ter V.  Union  Bank,  7  Humph.  548. 

127  Halliday  v.  McDougall,  20  Wend.  80. 

128  Carter  v.  Burley,  9  N.  H.  558;  Ticonic  Bank  v.  Stackpole,  41  Me.  ,'>i'J; 
Piner  v.  Clary,  17  B.  Mon.  645. 

129  Bonar  v.  Mitchell,  19  Law  J.  Exch.  302. 


B52  PRKSENTMENT    AND    NOTICE    OF    DISIIONOU.  [Cll.    9 

mere  matter  of  convenieuce  and  arrangement  between  the  holder 
and  the  notary,  and  is  by  no  means  a  requisite  imposed  or  recog- 
nized by  hiw  as  binding  upon  the  holder.^ ^°  Even  after  protest, 
it  is  no  necessary  part  of  the  official  duty  of  a  notary  to  give  notice 
to  the  indorsers  of  the  dishonor  of  a  promissory  note,  although  cer- 
tainly it  is  a  very  convenient  and  useful  course  in  the  transactions 
of  such  affairs  in  commercial  cities.^^^  In  this  connection  it  is 
proper  to  add  the  additional  disconnected  principles:  That  the 
states  of  the  Union,  as  regards  each  other,  are  foreign  states,  and 
that,  when  it  is  sought  to  charge  non-residents,  the  intervention  of 
a  notary  public  is  necessary.^^^  And  that  if  no  notary  can  be  con- 
veniently found,  the  bill  may  be  protested  by  any  reputable  citizen 
of  the  place  where  the  bill  is  dishonored.^^^  When  protested  by  a 
private  citizen,  the  rule  that  protest  must  be  made  in  the  presence 
of  two  witnesses  is  probably  obsolete.^'* 

NOTICE    or    DISHONOR. 

145.  NOTICE  OF  DISHONOR— Is  bringing,  either  ver- 
bally or  by  -writing,  to  the  knowledge  of  the  drawer  or 
the  indorser  of  an  instrument,  the  fact  that  a  specified 
negotiable  instrument,  upon  proper  proceedings  taken, 
has  not  been  accepted,  or  has  not  been  paid,  and  that  the 
party  notified  is  expected  to  pay  it. 

146.  Notice  must  be  given  as  follows: 

(a)  By  the  holder  of  the  instrument,  or  by  any 

person  upon  w^hom  a  liability  is  fixed  to 
any  person  upon  w^hom  it  is  sought  to  fix 
a  liability. 

(b)  Between  parties  residing   in   the   same  place, 

either  by  giving   it  personally,  verbally  or 

130  Bailey  v.  Dozier,  G  How.  23. 

131  Dickens  v.  Beal.  10  Pet.  582;  Morgan  v.  Van  Ingen,  2  Johns.  204;   Miller 
V.  Hackley,  5  .Johns.  3S4. 

132  Commercial  Bank  v.  Varnum,  40  N.  Y.  2G0. 

133  Burke  v.  McKay,  2  How.  GO;   Read  v.  Bank  of  Kentucky,  1  T.  B.  Mon.  91. 

134  Daniel,  Neg.  Inst.  §  0313- 


Ch.   9]  NOTICE    OF    DISHONOR.  353 

in  -writing,  or  by  leaving  a  -written  notice 
at  the  residence  or  place  of  business  of  the 
party  to  be  charged ;  bet-ween  parties  resid- 
ing in  different  places,  by  depositing  in  the 
post  ofB.ce,  postage  paid,  a  -written  notice, 
properly  addressed  to  the  person  to  be 
charged. 
(c)  Within  one  day  after  an  unqualified  refusal  to 
accept  the  bill  or  pay  the  instrument,  or  by 
an  indorser  -within  one  day  after  he  has  re- 
ceived notice  of  his  o-wn  liability.  This 
means  in  proper  business  hours  bet-ween  co- 
residents,  and,  -when  served  on  a  non-resi- 
dent, by  or  before  the  last  post,  if  there  be 
one  the  next  day,  if  not,  in  the  first  practic- 
able mail  thereafter. 

According  to  Lord  Denman,^'''  the  notice  of  dishonor  is  a  part 
and  parcel  of  the  contract  of  the  drawer  and  indorser,  and  not  a 
step  in  the  remedy  at  law  of  the  holder  to  recover  the  amount  of  the 
bill  or  note.  To  repeat  the  substance  of  his  words,  the  drawer  and 
indorser  contracts  to  pay  the  bill  or  note  upon  two  conditions :  One, 
the  dishonor  by  the  drawee,  acceptor  or  maker  on  due  presentment; 
the  other,  the  due  notification  to  him  of  such  dishonor.  And  taking 
up  the  latter  of  these  conditions,  we  purpose  in  this  and  the  suc- 
ceeding sections,  first,  to  examine  the  necessary  elements  constitut- 
ing this  portion  of  the  contract  of  the  drawer  and  indorser,  and  then 
to  classify  and  point  out  the  persons  and  the  methods  by  which  it  is 
carried  into  effect 
Sufficiency  of  Notice, 

Probably  the  most  important  test  of  a  notice  of  dishonor  is 
whether  or  not  the  words  bring  home  to  the  drawer  or  indorser  the 
knowledge  of  the  fact  that  he  is  legally  charged  with  liability  for 
the  payment  of  the  instruments^*     He  is  entitled  to  know,  first,  of 

13  0  Rothscliild  V.  Currie,  1  Q.  B.  43. 

i3«  A  letter  from  the  holder  to  the  indorser  of  a  bill,  threatening  legal  meas- 
ures unless  the  bill  be  paid,  does  not  amount  to  notice  of  dishonor  of  the  bill 

NEG.  RILLS 23 


354  PRESENTMENT   AND    NOTICE    OF    DISHONOR.  [Cll.   9 

the  breach  of  the  condition  to  accept  or  to  pay  the  instrument  on  the 
part  of  the  drawee,  maker  or  acceptor,  and,  second,  that  it  sought  to 
fix  a  liability  for  its  payment  upon  him.^^^  The  first  object  of  notice 
is  therefore  to  inform  the  party  to  whom  it  is  sent  that  acceptance  or 
payment  has  been  refused  by  the  drawee,  acceptor  or  malcer;  and  the 
second,  that  as  drawer  or  indorser  he  is  liable,  and  that  payment  is 
demanded  of  him.  The  important  question,  then,  is  to  determine  what 
is  due  and  proper  notice.  These  words  may  be  either  in  writing  or  ver- 
bal. That  a  verbal  notice  is  proper  seems  settled  both  in  New  York 
and  elsewhere,^ ^®  No  precise  form  of  words  is  necessary  to  express 
this  purpose,  the  rule  being  merely  that  the  form  of  words  used 
must  be  such  as  to  convey  legal  notice  to  the  party.     In  this  a  dis- 

by  the  acceptor.  Solarte  v.  Palmer,  1  Bing.  N.  C.  194.  A  bill  of  exchange,  In- 
dorsed in  blank,  was  left  by  the  indorsee  at  the  office  of  an  attorney  to  be 
presented.  On  presentment  by  the  attorney  the  bill  was  dishonored.  The  at- 
torney wrote  to  the  drawer  on  the  following  day,  describing  the  bill,  and  stat- 
ing that  it  bad  been  dishonored,  and  subscribed  his  name  and  residence.  Tliis 
was  held  a  sufficient  notice  of  dishonor,  though  the  attorney  did  not  state  in 
whose  behalf  he  applied,  nor  where  the  bill  was  lying.  Woodthorpe  v.  Lawes, 
2  Mees.  &  W.  109.  In  Hedger  v.  Steavenson,  Id.  799,  the  following  letter  from 
the  plaintiff's  attorney  was  held  to  be  a  sufficient  notice:  "Sir:  I  am  desired 
by  Mr.  H.  to  give  you  notice  that  a  promissory  note  for  £99.  18s.,  payable  to 
your  order  2  months  after  the  date  thereof,  became  due  yesterday,  and  has 
been  returned  unpaid;  and  I  have  to  request  you  will  please  remit  the  amount 
thereof,  with  Is.  6d.  noting,  free  of  postage,  by  return  of  post.  I  am,  &c.,  J.  S." 
In  this  case,  Parke,  B.,  said:  "It  seems  to  me  enough  if  it  appear  by  reason- 
able intendment,  and  would  be  inferred  by  any  man  of  business,  that  the  bill 
has  been  presented  to  the  acceptor  and  not  paid  by  him."  The  holder  of  a  bill 
of  exchange,  on  the  day  after  it  became  due,  called  at  the  office  of  J.,  the 
drawer.  The  latter  was  busy  at  the  time,  and  the  holder  sent  him  the  follow- 
ing note:  "B.'s  acceptance  to  J.,  £500,  due  12th  January,  is  unpaid.  Payment 
to  R.  &  Co.  is  requested  before  4  o'clock."  This  was  held  to  be  sufficient  notice, 
following  Parke,  B.,  in  Hedger  v.  Steavenson. 

137  Notice  of  dishonor  in  these  words:  "I  hereby  give  notice  that  a  bill  for 
£.50,  at  3  months  after  date,  by  A  upon  and  accepted  by  B,  and  indorsed  by 
you,  lies  at"  etc.,  "dishonored," — was  held  sufficient  without  further  intima- 
tion that  plalntifC  looked  to  defendant  for  payment.  King  v.  Blckley,  2  Q.  B. 
419. 

13  8  Cuyler  v.  Stevens,  4  Wend.  56G;  Woodin  v.  Foster,  16  Barb.  146;  Tindal 
V.  Brown,  1  Term  R.  167;  Housego  v.  Cowne,  6  Law  J.  Exch.  110;  Crosse  v. 
Smith,  1  Maule  &  S.  545;  Merritt  v.  Woodbury,  14  Iowa,  299;  First  Nat.  Bank 
of  Iowa  City  v.  Ryerson,  23  Iowa,  508;   Gilbert  v.  Dennis,  3  Mete.  (Mass.)  495. 


Ch.   9]  NOTICE   OF   DISHONOR.  355 

tinction  is  drawn  between  notice  of  dishonor  and  knowledge  of  dis- 
honor. Throughout  the  cases  the  statement  is  common  "that  knowl- 
edge of  the  dishonor  of  a  bill  is  not  equivalent  to  notice  of  it."  ^^® 
This  means  that  knowledge  which  is  equivalent  to  notice,  and  which 
will  make  a  drawer  or  indorser  responsible,  must  be  derived  from 
some  person  entitled  to  call  for  payment.  It  must  be  information 
that  the  bill  has  been  dishonored,  and  that  the  holder  is  in  a  position 
to  sue  him.  In  other  words,  the  receipt  of  information  by  an  in- 
dorser that  an  instrument  is  unpaid  is  not  sufficient  to  fix  his  lia- 
bility. There  must  be  coupled  with  it  information  derived  from 
some  competent  person,  that  he,  the  indorser,  is  looked  to  for  its 
payment^*" 

The  law  in  other  respects  has  formulated  certain  elements  for  con- 
stituting a  notice,  and  declares  notices  containing  them  sufficient 
to  bring  home  to  the  knowledge  of  the  drawer  and  indorser  the  fact 
that  he  is  charged  with  legal  liability.  These  elements  are:  ^*^  (1) 
That  the  notice  contain  a  sufiicient  description  of  the  instrument. 
(2)  That  the  notice  expressly  or  impliedly  notify  the  drawer  or  in- 
dorser of  the  presentment,  demand  and  refusal  of  the  drawer,  ac- 
ceptor or  maker  to  accept  or  to  pay  the  instrument.  (3)  That  the 
notice  inform  the  drawer  and  indorser  that  the  holder  looks  to  him 
for  payment,  though  this  element  is  not  indispensable  to  the  legality 
of  the  notice. 

Same — Identification  of  Instrument. 

The  common  form  of  identification  is  to  describe  the  instrument  by 
date,  amount,  and  parties,  and  state  where  it  is  awaiting  payment ;  but 
any  identification  which,  as  a  matter  of  fact,  would  indicate  unmis- 
takably to  a  business  man  of  ordinary  experience  what  instrument 
is  to  be  paid,  is  sufficient.^"     This  rule  does  not  insist  upon  strict 

139  Juniata  Bank  v.  Hale,  IG  Serg.  &  R.  157;  Bank  of  Old  Dominion  v.  Mc- 
Veigh, 29  Grat.  559,  2G  Grat.  852;   Brown  v.  Ferguson,  4  Leigh,  37. 

140  Gaunt  v.  Tlionipson,  7  C.  B.  400;   Miers  v.  Brown,  11  Mees.  &  W.  372. 

141  Artisans'  Bank  v.  Backus,  30  N.  Y.  100;  Story,  Prom.  Notes,  §  34S; 
Daniel,  Neg.  Inst.  §  973;  Tied.  Com.  Paper,  §  344;  Glicksman  v.  Earley,  78  Wis. 
223,  47  N.  W.  272,  and  Johns.  Cas.  Bills  &  N.  200. 

142  Gill  V.  Palmer,  29  Conn.  54;  Messenger  v.  Southey,  1  Man.  &  G.  70; 
Housatouic  Bank  v.  Laflin,  5  Cush.  546;  Reynolds  v.  Appleman,  41  Md.  015; 
Mills  V.  Bank  of  United  States,  11  Wheat.  431;   Thompson  v.  Williams,  14  Gal. 


356  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  [Cll.   i> 

technical  accuracy.  Its  object  is  to  enable  the  indorser  notified  to' 
know  exactly  on  ^vllat  bill  or  note  lio  has  iiuiirred  liability,  and  the- 
object  of  the  inquiry  of  the  court  is  to  ascertain  whether  or  not  he 
has  been  apprised  of  this  fact.  The  notice  must  state  what  the  bill 
or  note  is,^*^  and  must  not  be  calculated  in  any  way  to  mislead  the 
party  to  whom  it  may  be  given.  It  must  not  misdescribe  the  instru- 
ment, so  that  the  defendant  may  perhaps  be  led  to  confound  it  with 
some  other.^**  The  description  of  the  bill  or  note  should  be  suffi- 
ciently definite  to  enable  the  indorser  to  hnow  to  what  instrument 
in  particular  the  notice  applies;  for  an  indorser  may  have  indorsed 
many  bills  or  notes  of  different  dates,  sums,  and  times  of  payment^ 
and  payable  to  different  persons,  so  that  he  may  be  ignorant,  unless 
the  description  in  the  notice  is  special,  to  which  it  properly  applies- 
or  which  it  designates.^*"*  And  in  determining  whether  the  de- 
scription of  the  note  or  bill  is  sufficient,  the  circumstances  of  the  case 
and  the  indorser's  knowledge  of  these  circumstances  may  be  taken 
into  consideration.^*^  A  notice  w^hich  omits  an  essential  feature  of 
the  indorsement  or  misdescribes  it  is  an  imperfect  one,  but  is  not 
necessarily  invalid.^*^     It  is  invalid  only  when  it  fails  to  give  that 

102;  Tobey  v.  Lennig,  14  Pa.  St.  483;  Ross  v.  Planters'  Bank.  5  Humph.  335;. 
Wood  V.  Watson,  53  Me.  300;  Snow  v.  Perkins,  2  Mich.  2;j8;  McCune  v.  Belt,. 
88  Mo.  291. 

143  Daniel,  Neg.  Inst.  §  974.    But  see  Hodges  v.  Shuler,  22  N.  Y.  115. 

144  Stoi-y,  Prom.  Notes,  §  349. 

140  Cook  V.  Litchfield,  9  N.  Y.  279;  Home  Ins.  Co.  v.  Green,  19  N.  Y.  519. 

146  Daniel,  Neg.  Inst.  §  97G. 

147  In  Harrison  v.  Euscoe.  15  Mees.  &  W.  231,  it  was  shown  that  a  bill  of 
exchange  was  drawn  by  H,  indorsed  by  him  to  B,  and  by  B  to  C.  in  whose 
hands  it  was  dishonored.  C's  attorney  gave  notice  in  due  time  to  A,  but 
stated  therein,  by  mistake,  that  he  was  directed  by  B  (from  whom  he  had  no- 
authority)  to  apply  for  payment  of  the  bill.  It  was  held  that  the  notice  of 
dishonor  was  sufficient,  notwithstanding  this  misrepresentation,  the  only  effect 
of  which  was  to  give  A  every  defense  against  C  that  he  would  liave  had  if  the- 
notice  had  really  been  given  by  B.  In  an  action  by  the  first  indorsee  of  a  bill' 
against  the  drawer,  it  was  proved  that  the  plaintiff  wrote  a  letter  to  the  de- 
fendant, stating  the  bill  to  be  dishonored,  and  requiring  payment;  but  the- 
letter  misdescribed  the  bill  as  drawn  by  J.  H.  (the  acceptor),  and  accepted  by 
the  defendant.  Held,  that  this  was  sufficient  notice  of  dishonor.  Parke,  B., 
said:  "This  notice  is  quite  sufficient.  It  is  not  possible,  under  the  circum- 
stances, that  the  defendant  could  have  been  misled  by  it." 


€h.  9J  NOTICE    OF    DISHONOR.  357 

information  which  it  would  have  given  but  for  its  particular  imper- 
fection. And  even  in  case  the  notice  in  itself  be  defective,  if,  from 
the  evidence  of  the  attendant  circumstances,  it  is  apparent  that  the 
indorser  was  not  deceived  or  misled  as  to  the  identity  of  the  note, 
he  will  be  charged.^*^  It  thus  may  become  a  question  of  fact 
whether  or  not  from  the  contents  of  the  notice  itself  and  the  extrin- 
sic facts  admitted  into  the  case,  knowledge  of  the  dishonor  was  ac- 
tually brought  home  to  the  indorser.^*®  But  this  is  only  where 
there  is  doubt  whether  the  indorser  understood  what  particular  in- 
strument was  dishonored.  When  there  is  no  dispute  as  to  the  facts, 
the  sufficiency  of  the  notice  is  a  question  of  law  for  the  sole  inter- 
pretation of  the  court.^^° 
Same — Statement  of  Presentment,  etc. 

When  there  can  be  no  doubt  that  the  mind  of  the  drawer  or  indorser 
identifies  the  bill  or  note  which  is  unpaid,  then  the  further  question 
is  whether  the  notice  contained  a  statement  of  presentment,  demand, 
non  acceptance  or  non-payment  sufficient  to  comply  with  the  rules 
of  the  law  merchant.  This  is  a  question  of  law  and  of  construction 
peculiarly  the  province  of  the  court.^^^  Some  form  of  statement 
that  the  bill  or  note  has  been  duly  presented  and  dishonored  is  es- 
sential to  establish  the  claim  or  right  of  the  party  giving  notice, 
for  otherwise  he  will  not  be  entitled  to  any  payment  from  the  drawer 
and  indorser.^ ^^  Mere  notice  of  the  fact  that  the  bill  or  note  has 
not  been  paid  affords  no  proof  whatever  that  it  has  been  presented 
in  due  season,  or  even  that  it  has  been  presented  at  all.  And  if 
there  be  no  statement  of  the  dishonor  of  the  bill  or  note,  nor  any- 
thing from  which  it  can  be  fairly  implied  that  du,e  presentment  has 

14  8  Carter  v.  Bradley,  19  Me.  62;  Smith  v.  Whiting,  12  Mass.  6;  Moorman 
X.  State  Bank,  3  Port.  (Ala.)  353;   Remer  v.  Downer,  23  AVend.  620. 

149  Hodges  V.  Shuler,  22  N.  Y.  114. 

150  Cayuga  Co.  Bank  v.  Warden,  6  N.  Y.  19;   Dole  v.  Gold,  5  Barb.  494. 
161  Dole  V.  Gold,  5  Barb.  490. 

152  Lewis  V.  Gompertz,  6  Mees.  &  W.  402;  Wilkinson  v.  Adam,  1  Ves.  &  B. 
466;  Boulton  v.  Welsh,  3  Bing.  N.  C.  6S8.  Where  the  indorser  of  a  note  has 
died  before  the  maturity  of  the  note,  notice  must  be  sent  to  his  executor,  if 
such  executor  be  known.  INIerchants'  Bank  v.  Birch,  17  Johns.  (N.  Y.)  25.  As 
holding  that  a  notice  of  dishonor  mailed  with  the  address,  "To  the  estate  of 
H.  O.,  deceased,"  will  not  be  such  notice  as  to  charge  the  executor,  see  Mas- 
sachusetts Bank  v.  Oliver,  10  Cush.  (Mass.)  557. 


358  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  [Ch.   9 

been  made,  the  notice  is  fatally  defective.* "•  Whatever  will  show 
dishonor  is  sufficients'^*  No  particular  form  of  notice  is  necessary. 
The  holder  is  only  required,  in  such  language  as  he  may  adopt,  to 
inform  the  indorser  that  the  drawee,  acceptor,  or  maker  has  neglect- 
ed to  accept  or  pay  the  bill  or  note;  that  the  contingency  on  which 
the  drawer's  or  indorser's  promise  to  pay  depended  has  happened, 
and  that  his  liability  has  become  absolute.  The  express  statement 
of  the  facts  of  presentment,  demand,  and  non-acceptance  or  non- 
payment, in  themselves,  is  unnecessary.  These  facts  may  be  con- 
veyed by  express  terms  or  by  necessary  implication.^"'  "I  should 
myself  doubt,"  says  Parke,  B.,s°*  "whether  we  could  go  so  far  as  to 
say  that  it  ought  to  appear  upon  the  face  of  the  notice,  'by  express 
terms  or  necessary  implication,'  that  the  bill  was  presented  or  dis- 
honored. It  seems  to  me  enough  if  it  appear  by  reasonable  intend- 
ment, and  would  be  inferred  by  any  man  of  business,  that  the  bill 
had  been  presented  to  the  acceptor,  and  not  paid  by  him."  And 
where  no  mercantile  man,  upon  reading  the  notice,  could  possibly 
misunderstand  its  meaning,  that  is  deemed  within  the  meaning  of 
reasonable  intendment,  and  sufficient. 

Thus  the  doctrine  of  reasonable  intendment  includes  such  terms  as 
"dishonored,"  because  that  word  includes  presentment  and  de- 
mand,^"^  or  "protested,"  ^'^  because  that  also  shows  presentment, 
demand,  and  refusal,  or  such  other  words  coupled  with  a  statement 

153  Page  V.  Gilbert,  60  Me.  48S;  Gilbert  v.  Dennis,  3  Mete.  (Mass.)  495^ 
Phillips  V.  Gould,  8  Car.  &  P.  355;  Graham  v.  Sangston,  1  Md.  GO;  LockwoocJ 
V.  Crawford,  18  Conn.  361;   Sinclair  v.  ILjuah,  1  Speer,  244. 

154  Rowlands  v.  Springett,  14  Mees.  &  W.  7;  Shelton  v.  Braithwaite,  7  Mees. 
&  W.  435;   Ex  parte  Moline,  19  Ves.  216. 

166  Solarte  v.  Palmer,  1  Bing.  N.  C.  104.  A  letter  written  by  the  acceptor  to 
the  drawer  on  the  same  day  on  which  the  bill  was  presented  for  payment  and 
was  dishonored,  in  which  the  acceptor  stated  that  he  was  unable  to  pay,  and 
that  the  bill  was  in  plaintiff's  hands,  was  held  to  be  sufficient  notice,  in  the 
case  of  Rosher  v.  Kieran,  4  Camp.  87. 

106  Hedger  v.  Steavenson,  2  Mees.  &  W.  799. 

167  Stocken  v.  Collins,  9  Car.  &  P.  653;  Woodthorpe  v.  Lawes,  2  Mees.  & 
W.  109;   Edmonds  v.  Gates,  2  Jur.  188;   Smith  v.  Boulton,  Hurl  &  W.  3. 

168  Mills  v.  Bank  of  U.  S.,  11  Wheat.  431;  Cayuga  Co.  Bank  v.  Warden,  1 
N.  Y.  413;  Gnigeon  v.  Smith,  6  Adol.  &  E.  499;  Everard  v.  Wilson,  1  El.  Sc 
Bl.  801;  De  Wolf  V.  Murray,  2  Sandf.  166. 


Ch.   9 J  NOTICE    OF    DISHONOR.  359 

of  non-payment  as  'TTour  bill  is  this  day  returned  with  charges,"  or 
•'with  charges  or  protested  exchange."  And  a  very  good  illustra- 
tion of  how  the  doctrine  of  reasonable  intendment  enlarges  the  rule 
is  in  the  distinction  between  sufficient  notice  of  dishonor  of  paper 
made  payable  at  a  bank  or  other  particular  place,  and  notice  of  dis- 
honor of  paper  made  payable  at  large.^°®  If  made  payable  at  a 
bank  or  other  particular  place,  it  is  the  business  of  the  maker  or  ac- 
ceptor to  have  funds  at  that  place  when  the  paper  becomes  due. 
His  failure  to  do  so  amounts  to  a  dishonor,  and  it  is  sufficient  to  in- 
form the  indorser  of  this  failure.  No  specific  statement  of  demand 
and  presentment  is  necessary.  A  statement  to  the  indorser  of  non- 
payment, if  it  appears  that  the  paper  was  at  the  bank  at  the  time  of 
its  maturity,  is  sufficient,  because  such  a  statement  can  mean  noth- 
ing else  than  the  dishonor  of  the  paper.  If,  on  the  contrary,  the 
paper  is  payable  at  large,  a  statement  of  presentment  and  demand 
is  necessary,  because  a  personal  demand  of  the  maker  is  one  prereq- 
uisite of  dishonor.^®"  Such  expressions  as  "due  and  unpaid,"  ^^^ 
"that  the  note  remains  unpaid,"  ^^-  "notice  of  non-payment,"  ^'^ 
have  been  held  insufficient,  because  the  fact  alone  that  the  acceptor 
or  maker  has  not  paid  the  instrument  is  immaterial  to  the  liability 
of  the  indorser.  The  legal  fact  which  fixes  the  indorser's  liability 
is  the  demand  of  payment  of  the  parties  and  the  dishonor  of  the 
bill.^"*  It  is  a  better  practice  to  state  that  the  party  holding  the 
bill  looks  to  the  person  notified  for  payment,  but  this  in  itself  is  not 
indispensable.  The  reason  is  that  this  is  implied  in  the  very  act 
of  giving  notice.^  ®^  Notice  that  acceptance  or  payment  has  been 
demanded  of  the  drawee,  maker,  or  acceptor  and  refused  by  him  is 

159  See  Bigelow,  Bills  &  N.  p.  277. 

160  Dole  V.  Gold,  5  Barb.  490.  * 

161  Gilbert  v.  Dennis,  3  Mete.  (INIass.)  498. 
i62Pinkham  v.  Macy,  9  Mete.  (Mass.)  174, 

163  Townsend  v.  Lorain  Bank,  2  Ohio.  St.  355. 

164  Hartley  v.  Case,  4  Bam.  &  C.  339,  10  C.  L.  R.  G06;  Boulton  v.  Welsh,  3 
Bing.  N.  C.  6SS,  32  C.  L.  R.  283;  Strange  v.  Price,  10  Add.  &  El.  125,  37  C.  L. 
R.  88;   Furze  v.  Sharwood,  2  Adol.  &  El.  (N.  S.)  388,  42  C.  L.  R.  72G. 

165  Cowles  V.  Harts,  3  Conn.  517;  Shrieve  v.  Duckham,  1  Litt  (Ky.)  194; 
Warren  v.  Gilman,  17  Me.  300. 


360  PRESENTMENT   AND    NOTICE    OF    PISHCNOR.  [Cb.   9 

suflQcient  to  charge  the  drawer  or  indorser;  ^*'  and  it  certainly  can- 
not he  argued  that  it  is  necessary  to  state  what  the  law  itself  implies, 
— that  the  drawer  or  indorser  is  to  be  looked  to  to  pay  the  instru- 
ment if  the  acceptor  or  maker  does  not  pay  it.^"^ 
By  Whom  Notice  should  be  Given. 

In  pointing  out  the  pei*sons  and  process  by  which  knowledge  is 
brought  home  to  the  party  to  be  charged  with  liability,  the  law 
follows  principles  analogous  to  those  used  in  formulating  the  ele- 
ments to  be  used  in  the  notice  itself.  The  aim  is  to  establish  a 
process  such  that  a  business  man  of  ordinary  experience,  when 
proceeded  against,  would  know  that  he  would  have  to  pay  to  the 
holder  the  amount  of  the  instrument.  The  first  element  of  this 
process  is  the  rule,  already  alluded  to,  that  to  change  knowledge 
into  legal  notice  the  fact  of  dishonor  must  be  brought  home  to  the 
party  to  be  charged  ^®^  by  some  person  having  an  interest  in  enfor- 
cing the  bill  or  note.  Notice  must  be  by  a  party  or  by  some  person 
authorized  to  give  it  A  notice  by  a  mere  stranger  is  not  suffi- 
cient.^®® Properly  authorized  persons  are  an  agent  of  the  holder, 
who  may  give  notice,  because,  in  doing  so,  he  represents  and  acts 
on  behalf  of  his  principal.  A  notary,^ ^"  acting  in  his  official  char- 
acter, is  an  example  of  this.     An  attorney  is  also  such  an  agent,^'* 

i66Fitchburg  Ins.  Co.  v.  Davis,  121  Mass.  121;  Bank  of  U.  S.  v.  Corneal,  2 
Pet.  543. 

167  Furze  v.  Sharwood,  2  Gale  &  D.  116,  2  Q.  B.  416,  42  E.  C.  L.  72G;  Miers 
V.  Brown,  11  Mees.  &  W.  372;  King'  v.  Bickley,  2  Q.  B.  419. 

168  In  the  case  of  Willis  v.  Green,  5  Hill  (N.  Y.)  232,  it  was  held  that,  where 
a  note  was  made  by  two  persons  who  are  not  partners,  payment  must  be  de- 
manded of  each  maker,  to  charge  the  indorser,  and  also  that,  where  two  such 
persons  indorse  an  instrument  which  is  payable  to  their  own  order,  upon  non- 
payment notice  must  be  given  to  each. 

169  Ohanoine  v.  Fowler,  3  Wend.  173;  Sewall  v.  Russell,  Id.  276;  Lawrence 
V.  Miller,  16  N.  Y.  235;  Stanton  v.  Blossom,  14  Mass.  116;  Stewart  v.  Kenneft, 
2  Camp.  177.  In  this  case  it  was  said  by  Lord  Ellenborough  that  "the  notice 
must  come  from  the  person  who  can  give  the  drawer  or  indorser  his  immediate 
remedy  upon  the  bill;  othenvise  it  is  merely  an  historical  fact."  Brailsford  v. 
Williams,  15  Md.  l.JO. 

170  Shed  V.  Brett,  1  Pick.  401;  Bank  of  Utica  v.  Smith,  18  Johns.  230;  Reuick 
V.  Bobbins,  28  Mo.  339;   Swayze  v.  Britton,  17  Kan.  029. 

171  Firth  V.  Thrush,  8  Barn.  &  C.  387. 


Ch.  9]  NOTICE    OF    DISHONOR.  361 

and  so  a  collecting  bank  is  an  agent  for  transmitting  notices,^  ^^  or, 
more  accurately  speaking,  is  a  principal  for  the  purpose  of  trans- 
mitting notice  of  protest,  and  its  notary  who  protests  its  paper  is 
the  agent.^''^  But  with  these  exceptions,  due  to  the  doctrine  of 
agency  that  the  agent  is  in  law  the  same  as  the  principal,  the 
notice  must  emanate  from  some  person  who  is  a  party  to  the  bill. 
This  does  not  mean  the  holder  alone,^^*  because,  if  the  holder  only 
could  give  notice,  then  he  might  secure  his  own  rights  against  his 
immisdiate  indorser,  but  the  latter  and  every  other  party  to  the 
bill  would  be  deprived  of  all  remedy  against  the  anterior  indorsers 
and  drawer,  unless  each  of  these  parties  should  in  succession  take 
up  the  bill  immediately  on  receiving  notice  of  dishonor, — a  highly 
unreasonable  position.^ ^^  But  by  a  party  to  a  bill,  so  far  as  it 
relates  to  the  person  who  gives  or  is  given  notice,  is  meant  some 
person  upon  whom  a  liability  is  fixed,  or  one  who,  on  the  paper 
being  returned  to  him  when  he  pays  it,  will  be  entitled  to  reimburse- 
ment from  some  prior  party.  The  liability  of  the  party  must  be 
fixed  before  he  is  competent  to  give  notice,  although  he  need  not 
know  it  is  fixed  when  he  sends  the  notices  out.^^*  And  the  test 
between  the  party  to  the  bill,  in  the  sense  we  have  given  it,  and  the 
stranger  to  the  bill,  is  whether  the  party  giving  or  given  the  notice 
would  be  liable  upon  the  instrument.^"  The  reason  for  this  rule  is 
that,  unless  this  liability  is  fixed,  there  can  be  no  inference  that  the 
person  giving  the  notice  looks  to  the  party  to  whom  it  is  addressed 
for  payment;  whereas,  on  the  contrary,  when  the  liability  is  fixed, 
and  the  holder  gives  the  notice,  it  must  mean,  if  it  means  anything, 
that  he  looks  to  the  party  notified  for  payment.^''*  This  rule  ex- 
cludes, not  only  the  person  who  is  in  no  wise  a  party  to  the  instru- 

172  Bank  of  U.  S.  v.  Davis,  2  Hill,  451. 

173  Howard  v.  Ives,  1  Hill,  2G3. 

174  Tindal  v.  Brown,  1  Term  R.  167;  Chapman  v.  Keane,  3  Adol.  &  El.  193. 
This  case  held  that  an  indorsee  who  has  indorsed  over,  and  is  not  the  holder 
at  the  time  of  maturity  and  dishonor,  may  give  notice  at  such  time  to  an 
earlier  party,  and,  upon  afterwards  taking  up  the  bill  and  suing  such  party, 
may  avail  himself  of  such  notice. 

17  5  West  River  Bank  v.  Taylor,  34  N.  Y.  128. 
176  Jennings  v.  Roberts,  24  Law  J.  Q.  B.  102. 
17  7  Harrison  v.  Ruscoe,  15  Mees.  &  W.  231. 
17  8  East  V.  Smith,  4  Dowl.  &  L.  744. 


362  PRESENTMENT    AND    NOTICE    OF   DISHONOR.  [Ch.   9 

ment,  but  also  the  person  who  has  been  a  party  to  the  instrument 
and  liable  thereon,  but  whose  liability  is  discharged.  "The  misr 
chief  would  happen,"  says  Parke,  B.,^"°  "that  there  might  be  a  bill 
with  twenty  indorsements  which  the  holder  might  retain  twenty 
days  after  its  dishonor  and  then  recover  against  the  drawer,  on  a 
notice  then  given  to  him  by  the  first  indorsee,  which  that  indorsee 
could  not  do.  Such  a  notice  would  be  in  good  time  if  given  by  the 
first  indorsee,  and  would  therefore  be  bad  and  not  support  an  action 
by  the  last.  The  rule  excludes  the  case  of  notice  by  an  acceptor 
who  never  could  sue  himself  upon  the  bill  after  taking  it  up." 
To  Whose  Benefit  Notice  Accrues. 

Notice  sent  to  an  indorser  or  drawer  by  the  holder  accrues  to  the 
benefit  of  all  preceding  parties.  The  holder  may  be  satisfied  with 
giving  notice  to  his  immediate  indorser,  or  he  may  give  notice  to 
the  drawer  and  all  the  indorsers,  and  if  he  does  it  will  accrue  to 
the  benefit  of  each  indorser.^*"  This  rule  is  the  natural  outgrowth 
of  the  rule  that  notice  need  not  be  given  by  the  holder  of  a  bill,  but 
can  be  given  by  any  party  to  the  instrument.  For,  as  has  just 
been  said,  the  holder  may  only  seek  to  secure  his  rights  against  his 
immediate  indorser  by  regular  notice  to  him  alone.  And  in  order, 
therefore,  that  the  latter  and  every  other  party  to  the  instrument 
may  not  be  deprived  of  all  remedy  against  anterior  indorsers  and 
the  drawer,  it  is  prudent  in  each  party  who  receives  a  notice  ta 
give  immediate  notice  to  those  parties  against  whom  he  may  have 
the  right  to  claim.^*^  Whether  there  be  few  or  many  indorsers, 
the  duty  of  each  is  the  same.     It  is  to  transmit  the  notice  from  one 

17  0  Harrison  v.  Ruscoe,  15  Mees.  &  W.  231;  Turner  v.  Leech,  4  Barn.  &  Aid. 
451;    Rowe  v.  Tipper,  13  C.  B.  249. 

180  Jameson  v.  Swinton,  2  Taunt.  224;  Hilton  v.  Shepherd,  6  East,  14,  note; 
Stafford  v.  Yates,  18  Johns.  327;  Morgan  v.  Van  Ingen,  2  Johns.  204;  Spen- 
cer V.  Ballou,  18  N.  Y,  327.  Note— It  is  the  rule  to  notify  all  indorsers,  e.  g. 
indorsers  for  collection;  accommodation  drawer  or  indorser;  indorsers  of 
bills  or  notes  payable  on  demand;  each  partner,  as  well  as  the  firm,  by  name; 
each  of  the  joint  indorsers;  persons  representative,  if  any;  if  none,  then 
some  authorized  person  at  the  family  residence;  the  bankrupt  personally;  and 
to  the  assignee  of  the  bankrupt.  For  cases,  see  Tied.  Com,  Paper,  §  336, 
and  cases  cited. 

181  Bay  ley,  Bills,  p.  256;  Chapman  v.  Ktane,  3  Adol.  &  El.  193. 


Ch.   9]  NOTICE    OP    DISHONOR.  363 

indorsep  to  another,  in  the  usual  order  of  their  indorsements,'" 
And,  in  turn,  as  notice  is  received  by  each  indorser,  it  accrues  to 
the  benefit  of  all  subsequent  parties.  Thus,  for  example,  if  the 
holder  notifies  his  immediate  indorser,  and  he,  in  turn,  notifies  his 
immediate  indorser,  and  so  on,  through  the  chain  of  indorsers,  up 
to  the  second  and  first  indorser,  the  first  indorser  cannot  object 
that  he  has  received  no  notice  from  the  holder.  The  holder  can 
avail  himself  of  the  notice  given  the  first  indorser  by  the  second 
indorser.  It  is  sufficient  if  the  first  indorser  had  notice  from  any 
subsequent  holder  of  the  note  of  the  default  of  the  maker,  and  that 
he  would  be  looked  to  for  payment.^  ^^ 

Method  of  Giving  Notice. 

The  second  element  of  process  relates  to  the  method  of  actually 
giving  notice,  which  presents  itself  in  two  aspects.  The  first  is 
giving  notice  verbally  or  in  writing;  the  second  is  of  serving  the 
notice  in  writing  personally  or  serving  it  by  mail.  While  the  req- 
uisites of  verbal  notices  are  not  clearly  stated  by  the  courts,  it 
seems  to  be  agreed  that,  where  no  statute  intervenes,  a  verbal 
notice  is  sufficient.^®*  It  also  seems  to  be  enough  if,  from  the  con- 
versations between  the  parties,  it  can  be  ascertained  as  a  fact 
that  the  party  against  whom  the  liability  is  sought  to  be  enforced 
well  understood  what  instrument  was  referred  to.  The  courts  are 
less  strict  in  construing  a  verbal  notice  than  in  construing  a  written 
one.  This  is  because  a  verbal  notice  communicated  to  the  indorser, 
which  calls  forth  a  conversation  about  the  instrument  in  question, 
is  very  different  from  a  written  notice  sent  to  the  indorser.  The 
latter  constitutes  the  only  means  which  the  party  has  to  inform  the 

182  Dobree  v.  Eastwood,  3  Car.  &  P.  250;  Bank  of  Utica  v.  Smith,  1& 
Johns.  230;  Mead  v.'  Engs,  5  Cow.  303;  West  River  Bank  v.  Taylor,  34  N. 
Y.  128;  Morgan  v.  Wood  worth,  3  Johns.  Cas.  89. 

183  Stafford  v.  Yates,  18  Johns.  327;  Spencer  v.  Ballon,  18  N.  Y.  327;  Ly- 
saght  V.  Bryant,  9  C.  B.  46;  Wilson  v.  Swabey,  1  Starkie,  34;  Marr  v.  John- 
son, 9  Yerg.  1;  Triplett  v.  Hunt,  3  Dana,  126;  Stanton  v.  Blossom,  14  Mass. 
116;   Bank  of  United  States  v.  Goddard,  5  Mason,  366,  Fed.  Cas.  No.  917. 

184  Cuyler  v.  Stevens,  4  Wend.  566;  Cayuga  Co.  Bank  v.  Warden,  1  N.  Y. 
413;  Woodin  v.  Foster,  16  Barb.  146;  Gilbert  v.  Dennis,  3  Mete.  (Mass.)  495; 
Tindal  v.  Brown,  1  Term  R.  167;  Glasgow  v.  Pratte,  8  Mo.  336;  Merritt  v. 
Woodbury,  14  Iowa,  299;  Boyd  v.  City  Sav.  Bank,  15  Grat.  501;  Pierce  v, 
Schaden,  55  Cal.  406. 


5G4  PRESENTMEKT   AND    NOTICE    OF    DISHONOR.  [Cll.   9 

drawer  and  indorser  of  the  particular  instrument  dishonored.  With 
-a  verbal  notice,  however,  the  drawer  or  indorser  has  full  opportunity 
of  infonning  himself  fully  of  the  character  of  the  instrument  and 
of  the  liability  sought  to  be  enforced  against  hira.^^"^  It  is  almost 
needless  to  say  that  the  verbal  notice  must  be  given  to  the  indorser 
personally.  Mere  hearsay  does  not  create  a  binding  liability.^*' 
The  essentials  of  a  written  notice  have  been  already  described. 
Its  service  may  be  made  by  delivering  it  personally  to  the  person 
to  be  charged,^ *^  or  by  leaving  it  at  his  dwelling  place  or  place  of 
business,^ ^^  or  it  may  be  served  upon  him  by  mail.  The  object  of 
the  courts  is  to  formulate  a  set  of  rules  which,  if  followed,  will  ren- 
der it  reasonably  certain  that  the  notice  of  dishonor  will  reach  the 
hand  of  the  drawer  and  indorser,  and  charge  him  with  notice  or 
knowledge  of  his  liability  upon  the  instrument.^**     To  attain  this 

185  Metcalfe  v.  Richardson,  11  C.  B.  1011;  Phillips  v.  Gould,  8  Car.  &  P.  3o.j; 
Thompson  v.  Williams,  14  Cal.  102. 
188  Woodin  V.  Foster,  16  Barb.  146. 

187  Smedes  v.  Utica  Bank,  20  Johns.  372;  Louisiana  State  Bank  v.  Rowel, 
6  Mart.  (N.  S.)  506;  Shepard  v.  Hall,  1  Conn.  329;  Hartford  Bank  v.  Stedman, 
3  Conn.  489;  Bank  of  Columbia  v.  Lawrence,  1  Pet.  578;  Ransom  v.  Mack, 
2  Hill,  590;  Hobbs  v.  Strain e,  149  Mass.  212,  21  N.  E.  365;  Johns.  Cas.  Bills 
&  N.  202. 

188  Bank  of  Columbia  v.  Lawrence,  1  Pet.  578;  Nevius  v.  Bank,  10  Mich. 
547;  Sanderson  v.  Reinstadler,  31  Mo.  483;  Grinman  v.  Walker,  C  Iowa,  426. 
As  to  question  of  due  diligence  in  ascertaining  residence,  see  Bank  of  Utica  v. 
Bender,  21  Wend.  (N.  Y.)  643.  A  person  who  was  sent  by  the  holder  of  a 
dishonored  bill  called  at  the  house  of  the  drawer  the  day  after  it  became  due, 
saw  the  drawer's  wife,  and  told  her  that  he  had  brought  back  the  bill  that 
had  been  dishonored.  She  said  she  knew  nothing  about  it,  but  would  tell 
her  husband  of  it  when  he  came  home.  The  pai-ty  then  left,  leaving  no  writ- 
ten notice.  It  was  held  that  sufficient  notice  had  been  given.  Housego  v. 
Cowne,  2  Mees.  &  W.  348.  In  the  case  of  Allen  v,  Edmundson,  2  Exch.  719, 
It  appeared  that  the  holder  of  an  overdue  note  of  exchange  went  during  busi- 
ness hours  to  the  counting  house  of  the  drawer,  for  the  purpose  of  giving 
notice  of  dishonor;  and,  finding  the  counting-house  door  shut,  he  knocked  at 
the  door,  and,  no  one  answering,  he  came  away  without  leaving  any  notice. 
It  was  held  that  these  facts  did  not  support  an  allegation  of  due  notice,  but 
were  equivalent  to  a  dispensation  of  notice,  and  ought  to  have  been  so  pleaded. 

189  Bank  of  U.  S.  v.  Corcoran,  2  Pet.  121;  Carolina  Nat.  Bank  v.  Wallace, 
13  S.  C.  347;  Manchester  Bank  v.  Fellows,  28  N.  H.  302;  Bradley  v.  Davis, 
26  Me.  45;  Shelburne  Falls  Nat  Bank  v.  Townsley,  107  Mass.  444. 


Ch.   9]  NOTICE    OF    DISHONOR.  365- 

end  the  legislatures  of  many  states  have  pointed  out  methods  of 
service  which,  if  followed,  are  of  course  legal  and  proper  in  the  ju- 
risdictions in  which  those  legislatures  are  sovereign.  But,  in  the 
absence  of  statutory  regulation,  the  methods  of  service  adopted  by 
the  courts  are  divided  into  two  classes,  according  as  the  party  giv- 
ing notice  and  the  party  to  whom  it  is  given  reside  in  the  same  or 
different  places.  There  are  various  judicial  interpretations  of  the 
term  "residence  in  the  same  place."  One,  dependent  upon  slight 
authority,  is  that  the  corporate  limits  of  the  village,  town,  or  city 
define  the  limits  as  to  the  requirements  of  personal  notice,^ ^^  mean- 
ing that  persons  residing  within  those  limits  are  co-residents  and 
without  are  non-residents  as  to  each  other.  The  second  is  that  all 
persons  are  to  be  regarded  as  co-residents  who  receive  their  mails 
through  the  same  post  office,  because  the  post  olfice  can  only  be  used 
in  the  service  of  a  notice  as  a  means  of  transmission  and  not  of  de- 
posit. This  means  that  the  drawer  and  indorser  cannot  be  sub- 
jected to  the  uncertain  chance  of  getting  mail,  but  the  holder  must 
exert  himself  to  make  personal  service  or  its  equivalent  upon 
him.^^^  But  this  rule  is  qualified  by  the  further  one  that  where  the 
drawer  or  indorser  has  no  residence  and  no  regular  place  of  busi- 
ness in  the  city  or  town  where  the  holder  resides,  or  the  instrument 
is  payable,  he  may  be  treated  as  a  non-resident  and  served  by 
mail.^^^  It  being  determined  whether  the  party  giving  the  notice 
and  the  party  to  whom  it  is  given  are  residents  of  the  same  or  dif- 
ferent places,  the  following  rules  prevail; 

190  Barret  v.  Evans,  28  Mo.  333. 

101  Ireland  v.  Kip,  10  Johns.  490,  11  Johns.  231;  Shelburne  Falls  Nat.  Bank 
V.  Townsley,  102  Mass.  177,  107  Mass.  444;  Farmers'  &  M.  Bank  v.  Battle, 
4  Humph.  (Tenn.)  8G;  Barker  v.  Hall,  Mart.  &  Y.  (Tenn.)  183;  Forbes  v, 
Omaha  Nat.  Bank,  10  Neb.  338,  6  N.  W.  393.  As  holding  that  notice  of  dis- 
honor sent  through  the  mail  will  not  be  sufficient  where  both  parties  (sender, 
and  the  one  to  whom  the  notice  is  sent)  are  residents  of  the  same  town,  see 
Sheldon  v.  Benham,  4  Hill  (N.  Y.)  129.  As  holding  that  a  notice  of  dishonor 
mailed  to  an  indorser,  and  received  the  day  after  that  on  which  the  note  be- 
came due,  was  sufficient,  even  where  the  postoffice  was  in  the  same  town, 
see  Shaylor  v.  Mix,  4  Allen  (Mass.)  351. 

182  Bank  of  Columbia  v.  Lawrence,  1  Pet.  578;  Bank  of  U.  S.  v.  Norwood, 
1  Har.  &  J.  (Md.)  423;  Gist  v.  Lybrand,  3  Ohio,  307;  Jones  v.  Lewis,  8  Watts- 
&  S.  14;  Walker  v.  Bank  of  Missouri,  8  Mo.  704. 


366  PKKSKMMKNT    AND    NOTICE    OF    DISHONOR.  [Ch.   9 

(1)  If  of  the  same  place,  the  service  must  either  be  personal  ^"^  or 
else  be  made  by  leavinjx  at  his  place  of  domicile  or  of  business.^"* 
But,  as  an  exception  to  the  foivj^oinj^  rule,  the  notice  may  be  served 
by  mail  in  the  following  instances: 

(a)  If  the  holder  can  prove  that  the  party  to  be  charged  received 
the  notice  in  due  time.^""^ 

(b)  If  the  instrument  is  protested  by  a  notary  at  a  place  different 
from  that  of  the  party's  place  of  residence.^ "^ 

(c)  In  large  towns  and  cities,  where  letter  carriers  are  employed 
to  deliver  letters,  at  the  residences  or  places  of  business  of  parties 
who  usually  receive  their  letters  through  their  hands,  provided 
the  notice  be  mailed  early  enough  to  reach  the  drawer  or  indorser 
in  due  time.^®^ 

(d)  If  there  are  several  post  offices  in  the  same  town,  between 
which  there  is  a  regular  communication  by  raail,^°* 

(e)  If  it  is  the  certain,  clear,  definite  custom  of  a  bank,  in  giving 
notice,  to  serve  notices  by  mail,  and  this  is  known  to  the  party. ^"'' 

(2)  If  the  parties  reside  in  -different  places,  or  the  drawer  or  in- 

193  Bowling  V.  Harrison,  6  How.  248;  Williams  v.  Bank  of  U.  S.,  2  Pet.  DU; 
Boyd  V.  City  Sav.  Bank,  15  Grat  501;  Peirce  v.  Pendar,  5  Mete.  (Mass.)  352; 
John  V.  City  Nat.  Bank,  G2  Ala.  529;  Vance  v.  Collins,  G  Cal.  435;  Davis  v. 
Gowen,  19  Me.  447. 

19*  Ireland  v.  Kip,  10  Johns.  491;  Bank  of  Columbia  v.  Lawrence,  1  Pet. 
378;  Sanderson  v.  Reinstadler,  31  Mo.  483;  Nevius  v.  Bank,  10  Mich.  547; 
Grinman  v.  Walker,  9  Iowa,  426.  "It  is  well  settled  that,  when  the  indorser 
resides  at  the  place  of  the  presentment  and  dishonor  of  the  note,  the  notice 
must  be  served  on  him  personally,  or,  what  is  deemed  equivalent,  must  be 
left  at  his  dwelling  or  place  of  business."  Comstock,  J.,  in  Van  Vechten  v. 
Pryn,  13  N.  Y.  549. 

195  Cabot  Bank  v.  Warner,  10  Allen,  524;  Peabody  Ins.  Co.  v.  Wilson,  29 
W.  Va.  547,  2  S.  E.  888;  Phelps  v.  Stocking,  21  Neb.  443,  32  N.  W.  217. 

196  Hartford  Bank  v.  Stedman,  3  Conn.  489;  Warren  v.  Gilman,  17  Me.  360; 
Eagle  Bank  v.  Hathaway,  5  Mete.  (Mass.)  212. 

197  Shoemaker  v.  Mechanics'  Bank,  59  Pa.  St.  83;  Walters  v.  Brown,  15 
Md.  292;  Dobree  v.  Eastwood,  3  Car.  &  P.  250;  Smith  v.  Mullett,  2  Camp. 
208. 

198  Shaylor  v.  Mix,  4  Allen,  351;  Curtis  v.  State  Bank,  6  Blackf.  312;  Brind- 
ley  V.  Barr,  3  Har.  (Del.)  419;  Gist  v.  Ly brand,  3  Ohio,  307;  Bell  v.  Hagers- 
town  Bank,  7  Gill,  216. 

199  Thorn  v.  Rice,  15  Me.  263;  Bowling  v.  Harrison,  6  How.  248;  Carolina 
Nat.  Bank  v.  Wallace,  13  S.  C.  347. 


Ch.   9]  NOTICE   OF    DISHONOR.  367 

dorser  sought  to  be  charged  resides  at  a  place  other  than  that  at 
which  the  instrument  is  payable,^""  the  holder  may  make  service  by 
depositing  the  notice  in  the  post  office,2°i  inclosed  in  a  securely 
closed  post-paid  wrapper,  and  addressed  to  the  post  office  at  or 
nearest  to  the  party's  place  of  residence,  unless  he  is  accustomed  to 
receive  his  letters  at  another  post  office,  in  which  case  it  should  be 
directed  thereto.^"^  The  following  are  the  specific  rules  as  to  the 
address: 

(a)  If  the  residence  of  such  person  is  in  a  city  or  large  town,  it  is 
probably  sufficient  to  address  to  the  city  generally,  and  by  his  full 
name,  unless  it  appears  that  the  name  is  a  common  one  in  that  city 
or  town.2°* 


200  See  the  case  of  Chouteau  v.  Webster,  6  Mete.  (Mass.)  1,  In  which  a  citi- 
zen of  Boston  indorsed  a  note  payable  at  a  New  York  bank,  which  the  maker 
did  not  pay  at  maturity.  The  indorser  was  at  the  time  in  Washington,  as  a 
senator,  and  notice  of  non-payment  was  mailed  in  due  time  at  New  York,  ad- 
dressed to  him  at  Washington.  The  indorser  had  a  business  agent  in  Bos- 
ton, but  the  holder  was  ignorant  of  the  fact.    The  notice  was  held  sufficient. 

201  Bussard  v.  Levering,  6  Wheat.  102;  Munn  v.  Baldwin,  6  Mass.  316; 
Miller  V.  Hackley,  5  Johns.  375;  Friend  v.  Wilkinson,  9  Grat.  31;  Saunderson 
V.  Judge,  2  H.  Bl.  509;  Phelps  v.  Stocking,  21  Neb.  443,  32  N.  W.  217;  Wooley 
V.  Lyon,  117  111.  244,  6  N.  E,  885. 

2  02  Bank  of  Colimibia  v.  Lawrence,  1  Pet.  582;  Mercer  v.  Lancaster,  5  Pa. 
St.  160.  In  this  case  it  was  held  that  a  notice  of  dishonor  was  sufficient,  if 
addressed  to  an  indorser  at  the  postoffice  where  he  is  in  the  habit  of  receiving 
his  mail,  although  such  office  is  not  nearest  to  his  residence.  Citizens'  Nat. 
Bank  v.  Cade,  73  Mich.  449,  41  N,  E.  500;  Northwestern  Coal  Co.  v.  Bowman, 
69  Iowa,  150,  28  N.  W.  496.  Where  there  are  two  postoffices  in  the  town 
where  the  indorser  resides,  it  will  be  sufficient,  prima  facie,  if  notice  be  ad- 
dressed to  him  at  the  town  generally.  This  may,  however,  be  rebutted  by 
proof  of  the  indorser's  custom  of  receiving  his  letters  at  one  office,  and  by 
proof  that  the  holder  might,  by  reasonable  diligence,  have  ascertained  this. 
Morton  v.  Westcott,  8  Cush.  (Mass.)  425. 

203  True  V.  Collins,  3  Allen,  440;  Morse  v.  Chamberlin,  144  Mass.  406,  11 
N.  E.  560;  Riggs  v.  Hatch,  16  Fed.  840.  This  doctrine  is  disputed.  Walter 
V.  Haynes,  Rjan  &  'SI.  149.  In  this  case  it  was  held  that  a  letter  directed. 
"Mr.  Haynes,  Bristol,"  containing  notice  of  the  dishonor  of  a  bill,  was  proved 
to  have  been  put  in  the  postoffice.  It  was  held  that  this  was  not  sufficient 
proof  of  notice,  the  direction  being  too  general  to  raise  a  presumption  that 
the  letter  reached  the  particular  individual  charged.  See,  however,  Mann  v. 
Moors,  Ryan  &  M.  249. 


368  PRESENTMENT    AND    NOTUE    OF    DISHONOR.  [Ch.   9 

(b)  If  the  party  live  at  one  place  and  receive  his  letters  at  an- 
other post  oflice,  notice  may  be  sent  to  either.^"* 

(c)  flailing  to  any  address  given  by  the  drawer  or  indorser  for 
that  purpose  will  be  sufficient.^"' 

(d)  If  the  party  to  be  charged,  unknown  to  the  holder,  changes 
his  place  of  residence  after  drawing  or  indorsing  the  bill  or  note^ 
the  holder  may  nevertheless  still  address  the  notice  to  his  former 
place  of  residence,  provided  he  in  good  faith  supposed  he  was  ad- 
dressing it  to  the  actual  place  of  residence  of  such  party.^"* 

Time  of  Giving  Notice. 

The  third  element  of  process  relates  to  the  time  at  which  notice 
is  given.  Notice  of  dishonor  cannot  be  given  before  actual  dis- 
honor of  the  instrument  takes  place.^"^  This  is  because  the  law 
merchant  insists  upon  a  legal  presentment  and  an  actual  dishonor 
before  it  fixes  the  liability  upon  the  indorser.  Without  these  the 
notice  of  dishonor  is  a  meaningless  form.  The  fact  that  the  bill  is 
unpaid  is  immaterial.  It  must  be  dishonored  before  the  indorser 
can  be  liable,  and  hence  prerequisites  to  the  issuing  of  the  notice 
are  the  legal  formalities  necessary  to  create  a  dishonor.^o^     But^ 

204  Bank  of  U.  S.  v.  Carueal,  2  Pet.  549;   Williams  v.  Bank  of  U.  S.,  Id.  9G. 

20  5  Importers'  &  Traders'  Nat.  Bank  v.  Shaw,  144  Mass.  424,  11  N.  E.  GGGj 
Bank  of  America  v.  Shaw,  142  Mass.  201,  7  N.  E.  779. 

206  See  Munn  v.  Baldwin,  G  Mass.  31G;  Requa  v.  Collins,  51  N.  Y.  14S; 
Ward  V.  Perrin,  54  Barb.  89.  In  Berridge  v.  Fitzgerald,  L.  R.  4  Q.  B.  G39,  a 
bill  was  shown  to  have  been  drawn  on  a  company,  and  accepted  by  the  man- 
ager. The  defendant  and  another  director  indorsed.  At  matm-ity  the  bill  waa 
not  paid,  as  the  affairs  of  the  company  were  being  wound  up.  The  plaintilf 
did  not  know  the  defendant's  place  of  residence,  so  he  sent  the  notice  to  him 
at  the  company's  office.  The  defendant  had  for  some  time  ceased  to  coma 
there,  since  the  company  had  become  embarrassed.  The  notice  was  held  fc 
be  good  under  the  circumstances.  In  the  case  of  Rawdon  v.  Redfield,  4  Sandf. 
(N.  Y.)  178,  it  was  shown  that  at  the  date  of  the  note  the  indorser  lived  iu 
Troy,  but  before  maturity  of  the  note  he  moved  to  New  York.  His  name  was^ 
not  in  the  directory,  however,  and  the  notary  who  protested  the  bill  in  New 
York,  being  infonned  by  the  holder  and  acceptor,  that  Troy  was  the  place  of 
residence  of  the  indorser,  mailed  him  a  notice  to  that  place.  This  was  held 
to  be  sufficient  notice.  In  the  case  of  Beale  v.  Parrish,  20  N.  Y.  407,  411,  it 
was  held  by  Groverj  J.,  that  "inability  to  discover  the  residence  of  the  in- 
dorser excuses  the  proper  service  only  so  long  as  such  inability  continues." 

2  07  Jackson  v.  Richards,  2  Caines,  343. 

208  Nicholson  v.  Gouthit,  2  H.  Bl.  009;  Jackson  v.  Richards,  2  Caines,  343, 


Ch.   9]  NOTICE    OF    DISHONOR,  369 

the  dishonor  being  once  fixed,  the  holder  has  a  reasonable  time  to 
take  steps  to  fix  the  liability  of  the  parties  responsible  over  to  him 
upon  the  bill  or  note.  The  meaning  of  this  term  "reasonable  time" 
has  become  established  by  universal  usage.  He  may,  it  is  true, 
give  notice  at  once,  but  all  that  is  required  of  him  is  reasonable 
diligence.  Reasonable  diligence  is  regulated  by  practical  conven- 
ience and  the  usual  course  of  business.  Between  parties  living  in 
the  same  place,  the  holder  has  until  the  expiration  of  the  follow- 
ing business  day  to  give  notice.  He  may  give  it  within  banking 
hours  at  the  bank,  within  business  hours  at  the  countinghouse 
or  place  of  business,^"®  and  within  the  hours  of  rest  at  the  dwell- 
ing place.^^"  Between  parties  living  in  different  places,  the  notice 
must  be  put  into  the  post  office  in  time  to  go  by  a  mail  of  the  day  next 
succeeding  the  last  day  of  grace,  or  the  first  possible  or  practicable 
mail  after  the  day  of  maturity.^^^  The  rule  at  first  required  that  notice 
of  the  default  of  the  maker  or  acceptor  should  be  put  into  the  post 
oftice  early  enough  to  be  sent  by  the  mail  of  the  day  next  succeed- 
ing the  last  day  of  grace.^^^  But  it  often  happened  that  the  mail 
of  the  day  succeeding  the  day  of  default  went  out  at  unreason- 
able hours,  or  before  a  reasonable  time  could  be  had  for  deposit- 

209  Allen  V,  Edmonson,  2  Car.  &  K.  547;  Adams  v.  Wright,  14  Wis.  408; 
Garnett  v.  Woodcock,  6  Maule  &  S.  44;   Parker  v.  Gordon,  7  East,  385. 

210  In  the  case  of  Jameson  v.  Swinton,  2  Taunt  224,  the  bill  was  shown  to 
have  been  dishonored  on  July  10th.  At  4  o'clock  p.  m.  of  the  same  day  notice 
was  given  to  the  last  indorser.  At  8  or  9  o'clock  on  the  night  of  the  11th  this 
last  indorser  gave  the  defendant  notice.  It  was  held  that  the  last  indorser 
gave  notice  soon  enough  to  entitle  him  to  recover  against  the  defendant. 

211  Tindal  v.  Brown,  1  Term  R.  1G7;  Darbishire  v.  Parker,  6  East,  3;  Lenox 
V.  Roberts,  2  Wheat.  373.  As  holding  that  a  letter  received  on  Sunday  need 
not  be  opened  till  Monday,  so  that  notice  of  dishonor  will  be  held  to  have 
been  received  on  that  day,  and  that  transmitting  such  notice  by  next  day's 
post  is  sufficient  diligence,  see  2  Bam.  &  Aid.  501,  note  a.  In  Gladwell  v. 
Tm-ner,  L.  R.  5  Exch.  59,  all  the  parties  to  the  bill  were  shown  to  reside  in 
London.  On  the  morning  after  the  dishonor  of  the  bill,  the  plaintiff,  who  did 
not  know  the  residence  of  the  defendant  (the  drawer),  applied  to  S.  for  in- 
formation. The  latter  was  not  at  home,  and  the  plaintiff  did  not  obtain  his 
Information  until  5:30  p.  m.  of  the  same  day.  He  posted  his  notice  of  dis- 
honor after  6  p.  m.,  and  it  was  not  received  that  night.  It  was  held  that, 
under  the  circumstances,  the  notice  was  not  too  late. 

ai2  Bank  of  Alexandria  v.  Swann,  9  Pet  33. 
NEG.  BILLS — 24 


870  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  [Ch.   9 

ing  the  notice,  as,  for  example,  soon  after  midnight,  or  at  a  very 
early  hour  in  the  morning,- ^^  and  in  such  cases  was  sometimes 
made  up  and  closed  the  evening  preceding.  For  this  reason  the 
rule  universally  adopted  has  been  that  the  notice,  in  order  to 
charge  the  drawer  or  Indorser,  must  be  deposited  in  the  post  office 
in  time  to  be;  sent  by  mail  of  the  day  succeeding  the  day  of  the  dis- 
honor, providing  the  mail  of  that  day  be  not  closed  at  an  unrea- 
sonable hour,  or  before  early  and  convenient  business  hours.^^*  In 
case  of  indorsers,  each  party  to  a  bill  or  note  has  the  same  time 
after  receipt  of  notice,  for  giving  notice  to  other  parties,  that  was 
allowed  to  the  holder  after  default,  and  the  time  in  regard  to  them 
is  governed  by  the  principles  we  have  just  stated.^^"  Tliis  rule, 
however,  has  its  limitations.  If  the  holder  of  a  bill  of  exchange 
or  promissory  note  wishes  to  avail  himself  of  a  notice  of  dishonor 
given  by  him  to  a  remote  indorser,  he  must  give  it  within  the  time 
within  which  he  is  by  law  required  to  give  it  to  his  immediate  in- 
dorser. And  he  cannot  avail  himself  of  his  laches  to  gain  another 
day.-^'     If  he  could,  the  consequence  which  has  already  been  point- 

213  Geill  V.  Jeremy,  Moody  &  M.  61.  In  tliis  case,  it  was  held  that  a  party 
receiving  notice  of  dishonor  of  a  bill  of  exchange  need  not  give  notice  to  the 
party  above  him  till  the  next  post  after  the  day  on  which  he  himself  receives 
the  notice,  although  he  might  easily  give  it  that  day,  and  there  is  no  post  on 
the  following  day.  Mitchell  v.  Cross,  2  R.  I.  437;  West  v.  Brown,  6  Ohio  St. 
542;   Chiclv  v.  Pillsbury,  24  Ma  458. 

214  Fullerton  v.  Bank  of  U.  S.,  1  Pet.  605-608;  Eagle  Bank  v.  Chapin,  3  Pick. 
180;  Talbot  v.  Clark,  8  Pick.  51;  Carter  v.  Burley,  9  N.  H.  559-570;  Farmers' 
Bank  of  Maryland  v.  Duvall,  7  Gill  &  J.  79;  Freeman's  Bank  v.  Perkins,  18 
Me.  292;  Mead  v.  Engs,  5  Cow.  303;  Sewall  v.  Russell,  3  Wend.  276;  Brown 
V.  Ferguson,  4  Leigh,  37;  Dodge  v.  Bank  of  Kentucky,  2  A.  K.  Marsh.  610; 
Hickman  v.  Ryan,  5  Litt.  24;  Hartford  Bank  v.  Stedman,  3  Conn.  489;  Brenzer 
V.  Wightman,  7  Watts  &  S.  264. 

215  Sheldon  v.  Benham,  4  Hill,  129;  Howard  v.  Ives,  1  Hill,  263;  Lawson  v. 
Farmers'  Bank,  1  Ohio  St.  206,  Johns.  Cas.  Bills  &  N.  203;  Shelburne  Falls 
Bank  v.  Townsley,  102  Mass.  177;  Simpson  v.  Turney,  5  Humph.  419;  Seaton 
V.  Scovill,  18  Kan.  435;   Bray  v.  Hadwen,  5  Maule  &  S.  68. 

2  1G  Brown  v.  Ferguson,  4  Leigh,  37;  Turner  v.  Leech,  4  Bam.  &  Aid.  451. 
In  this  case,  Abbott,  C.  J.,  said:  "The  plaintiff,  who  ought  to  have  received 
notice  of  the  dishonor  of  the  bill  of  exchange  from  B.  on  the  5th  September,  did 
not,  in  fact,  receive  notice  till  the  Sth,  and  therefore  he  was  clearly  discharged 
by  the  laches  of  the  holder.  Then  can  he,  by  paying  the  bill,  place  the  prior 
indorsers  in  a  worse  situation  than  that  in  which  they  would  otherwise  have 


Ch.   9]       EXCUSES    FOR    FAILURE    TO    PRESENT    OR    TO    GIVE    NOTICE.  371 

ed  out  would  follow,  namely,  that,  if  there  were  twenty  indorsers, 
he  would  have  twenty  days  within  which  to  give  notice  to  the 
first  of  them.  The  holder  has  his  day  to  give  notice  to  any  party 
he  may  seek  to  charge,  and  each  of  the  prior  indorsers  in  turn  has 
his  day.  Each  has  one  day  to  give  notice  to  all  parties  against 
whom  he  intends  to  enforce  his  remedy.*^^  The  holder  may  avail 
himself  of  a  notice  duly  given  by  any  other  party  to  a  bill,  but 
this  notice  must  be  given  in  due  time  by  the  party  to  the  bill,  by 
which  is  meant  due  time  if  he  himself  were  serving.^^' 

EXCUSES  FOR  FAILURE  TO  PRESENT  OR  TO  GIVE  NOTICE. 

147.  Presentment  of  a  bill  or  note  for  acceptance  or 
payment  is  not  necessary: 

(a)  As   against   the   drawer   "when   he    has    no  reason 
through  his  o"wn  fault  to  expect  that  the  bill  ■will 

been?  I  think  he  cannot  do  so;  and  that,  in  paying  this  bill,  he  has  paid  it 
in  his  own  wrong,  and  cannot  be  allowed  to  recover  upon  it  against  the  de- 
fendant." Kennedy  v.  Geddes,  8  Port  (Ala.)  263;  Stix  v.  Mathews,  G3  Mo, 
371;  Carter  v.  Burley,  9  N.  H.  558.  It  was  decided  in  the  case  of  Fitchburg 
Bank  v.  Perley,  2  Allen,  433,  that  an  indorser  of  a  dishonored  note  will  be 
rendered  liable  to  a  subsequent  indorser,  if  such  indorser,  having  received  a 
duplicate  notice  from  notary  of  holder,  for  the  prior  indorser,  mailed  it,  with  the 
proper  address,  on  the  day  of  its  receipt,  although  it  did  not  reach  its  destina- 
tion as  soon  as  if  it  had  been  sent  by  the  holder  or  notary. 

217  In  an  action  by  the  fourth  against  the  first  indorsee  of  a  note.'all  the 
parties  to  which  resided  in  London,  it  was  shown  that  the  plaintiff  received 
notice  of  dishonor  from  his  indorsee  on  the  20th,  and  gave  notice  to  his  im- 
mediate indorser  by  a  letter  mailed  on  the  evening  of  the  21st,  but  so  late 
that  it  was  not  delivered  until  next  morning.  This  was  held  to  be  such  laches 
as  to  discharge  all  prior  indorsers,  though,  in  the  course  of  the  22d,  notice  was 
given  to  second  indorsee  and  to  defendant.  Smith  v.  Mullett,  2  Camp.  208. 
In  the  case  of  Howard  v.  Ives,  1  Hill  (N.  Y.)  263,  it  was  held  that  "the  next 
day"  is  to  be  construed  as  meaning  the  next  business  day,  so  that,  in  case  of 
protest  on  Saturday,  notice  will  be  in  time  if  mailed  on  the  foUowmg  Monday. 
The  indorsee  of  a  bill  of  exchange  left  it  with  his  bankers,  who  presented  it 
for  payment  on  the  4th,  when  it  was  dishonored,  and  on  the  5th  they  returned 
it  to  the  indorsee,  who  gave  notice  of  the  dishonor  to  the  drawer,  on  the  6th, 
by  post.    Such  notice  was  held  to  be  reasonable.    Scott  v.  Lufford,  9  East,  347. 

218  Rowe  V.  Tipper,  13  C.  B.  249;  Dobree  v.  Eastwood,  3  Gar.  &  P.  250. 


372  PRESENTMfcJNT    AND    NOTICE    OF    DISHONOR.  [Ch.    0 

be  accepted  or  paid,  but  this  does  not  excuse  a 
failure  to  give  notice  to  the  indorsers. 

(b)  As  against  all  parties  -when,  by  such  causes  as  ac- 

cident, superior  force,  sickness,  absence,  or  death 
of  the  acceptor  or  maker,  it  \^as  impossible,  after 
using  due  diligence,  to  present  it,  but  this  does 
not  excuse  failure  to  give  notice  of  dishonor  to 
the  drawer  and  indorsers. 

(c)  Where  the  person  against  whom  the  bill  is  sought 

to  be  enforced  has  been  fully  secured  against  loss 
by  the  person  principally  liable  on  the  instrument, 
and  has  promised  to  see  to  the  acceptance  or  pay- 
ment of  the  paper,  its  presentment  is  unneces- 
sary. 

(d)  "Where  presentment  or  notice  of  dishonor  has  been 

waived  by  express  agreement  or  is  implied  in 
the  acts  of  the  parties,  it  is  unnecessary. 

The  foregoing  are  common  instances  among  the  many  which  the 
courts  construe  as  a  waiver  of  the  right  of  presentment  of  an 
instrument  or  notice  of  its  dishonor.  They  rest  upon  somewhat 
different  reasons,  which  it  is  our  purpose  to  explain. 

Where  the  drawer,  through  his  own  fault,  has  no  reason  to  ex- 
pect the  bill  will  be  paid,  it  is  unjust  to  cast  upon  the  holder  the 
duty  of  presentment  and  notice.^  ^®     These  are  steps  taken  to  fix 

219  Terry  v.  Parker,  6  Adol.  &  E.  502.  In  this  case  it  was  held  that  if  the 
drawer  of  a  bill  of  exchange  have  no  effects  in  the  hands  of  the  drawee  at 
the  time  of  drawing  the  bill,  and  of  its  maturity,  and  have  no  groiind  to  expect 
that  it  will  be  paid,  it  is  not  necessary  to  present  the  bill  at  maturity;  and  if 
it  be  presented  two  days  after,  and  payment  be  refused,  the  drawer  is  liable. 
Mobley  v.  Clark,  28  Barb.  390;  Kinsley  v.  Robinson,  21  Pick.  327;  Caunt  v. 
Thompson,  7  C.  B.  400.  "The  law  requires  notice  to  be  given  for  this  reason, 
because  it  is  presumed  that  the  bill  is  draAvn  on  account  of  the  drawee's  hav- 
ing effects  of  the  drawer  in  his  hands;  and,  if  the  latter  has  notice  that  the 
bill  is  not  accepted  or  not  paid,  he  may  withdraw  them  immediately.  But,  If 
he  has  no  effects  in  the  other's  hands,  then  he  cannot  be  injured  for  want  of 
notice."  BuUer,  J.,  in  Bickerdike  v.  Bollnian,  1  Term  R.  405.  For  a  holding  to 
the  same  effect,  by  the  same  judge,  see  Corney  v.  Da  Costa,  1  Esp.  302.    In 


Ch.   9]       EXCUSES    FOR    FAILURE    TO    PRESENT    OR    TO    GIVE    NOTICE.  373 

the  drawer's  liability,  and  need  only  be  taken  when  tbe  bill  was 
given  in  good  faith,  and  after  proper  provision  for  its  acceptance 
or  payment  had  been  made  on  the  drawer's  part.  He  has  made  a 
contract  with  the  holder,  one  element  of  which  was  that  the  drawee 
would  honor  his  bill  when  presented.  And,  if  it  can  be  shown 
that  there  could  have  been  no  reasonable  expectation  of  this,  the 
drawer  can  suffer  no  loss  or  injury  from  the  failure  of  the  holder  to 
make  a  presentment  to  the  drawee  which  would  be  fruitless  if  made. 
Notice  of  dishonor  as  to  him  would  be  an  empty  form,  which  the 
law  will  not  require  at  the  hands  of  the  holder.  But  these  rea- 
sons do  not  apply  to  excuse  presentment  and  notice  as  to  the  in- 
dorsers,  unless  the  indorsers  have  indorsed  for  the  accommodation 
of  the  drawer,  with  knowledge  of  the  fact  that  the  drawer  has  no 
right  to  expect  acceptance  or  payment.^ ^°  For  if  the  indorsers 
know  nothing  of  the  relation  between  the  drawer  and  drawee,  they 
may  require  presentment  and  notice,  although  the  drawer  cannot.^ ^^ 
The  reason  of  the  rule  would  not  apply  also  where  the  drawee, 
though  he  had  no  funds  of  the  drawer  in  his  hands,  had  promised 
to  accept  the  bill  for  the  drawer's  accommodation,- ^^  nor  would  it 
apply  where  the  drawer  had  consigned  property  to  the  drawee 
which  he  drew  against,^^^  nor  where  there  is  a  running  account 

the  case  of  Dennis  v.  Morrice,  3  Esp.  158,  Lord  Kenyon  held  that  "the  only 
case  iu  which  notice  is  dispensed  with  is  where  there  are  no  effects  of  the 
drawer  in  the  drawee's  hands.    See,  also.  Sands  v.  Clarke,  8  C.  B.  751. 

22  0  French  v.  Bank  of  Columbia,  4  Cranch,  141;  Leach  v.  Hewitt,  4  Taunt. 
731. 

221  Carter  v.  Flower,  16  Mees.  &  W.  743;  Brown  v.  Maffey.  15  East,  216; 
Bogy  V.  Keil,  1  Mo.  743;  Warder  v.  Tucker,  7  Mass.  449;  Itea  v.  Dorrance, 
18  Me.  137.  In  the  case  of  Turner  v.  Samson,  2  Q.  B.  Div.  23,  Mellish,  L.  J., 
said:  "It  appears  beyond  all  doubt  that  the  bill  was  an  accommodation  bill, 
and  that  the  drawer  and  the  other  defendants,  as  indorsers,  all  signed  the  bill 
for  the  accommodation  of  S.  The  question  is,  in  substance,  whether  the  de- 
fendant (the  appellant)  was  entitled  to  notice.  He  was  plainly  not  the  per- 
son who  was  to  take  up  the  bill,  and  he  had  a  right  to  suppose  that  another 
person  would  see  that  it  was  taken  up.  It  appears  to  me  that  the  defendant 
was  in  the  same  position  as  if  the  acceptor  had  been  the  person  who  was 
ultimately  liable  to  pay." 

222  Walwyn  v.  St.  Quintin,  1  Bos.  &  P.  G52;  Adams  v.  Darby,  28  Mo,  1G2; 
Oliver  v.  Bank  of  Tennessee,  11  Humph.  74. 

223  Dickins  v.  Beal,  10  Tet.  572;   Grosvenor  v.  Stone,  8  Pick.  79. 


374  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  [Ch.   9 

between  liim  and  the  drawer,^^*  nor  in  any  case  where  he  had  rea- 
son to  expect  his  draft  would  be  honored.^^o  rpj^g  -f-pg^  ^q  \)q  ap- 
plied is  whether  the  drawer  had  a  legal  right  to  expect  or  require 
that  the  drawee  would  honor  his  bill.  If  the  courts  can  construe 
such  a  legal  right  or  just  expectation  on  his  part,  failure  to  present 
the  bill,  and  give  him  notice  of  its  dishonor,  discharges  him. 

The  second  class  of  instances,  such  as  war,-^"  disease,^^^  the  sus- 

224  In  the  case  of  Hammond  v.  Dufrene,  3  Camp.  145,  Lord  Ellenborongh 
said:  "I  conceive  the  whole  period  must  be  looked  to  from  the  drawing  of 
the  bill  till  it  becomes  due,  and  that  notice  is  requisite  if  the  drawer  has  effects 
in  the  hands  of  the  drawee  at  any  time  during  that  inteiTal."  In  Thackray 
V.  Blackett,  Id.  1G4,  it  was  shown  that  after  acceptance  and  mdorsement,  and 
before  maturity,  certain  bills  drawn  on  P.  &  S.  were  destroyed  by  mistake 
while  in  the  hands  of  the  acceptor.  This  fact  was  made  known  to  the  defend- 
ant (the  drawer),  and  he  was  requested  to  give  other  bills.  He  refused,  and 
afterwards  P.  &  S.  failed.  No  notice  was  given  the  defendant  of  dishonor, 
though  the  bills  were  presented  on  maturity.  Lord  Ellenborongh  held  that 
"it  is  well  settled  that  insolvency  or  bankruptcy  of  the  acceptor  does  not  dis- 
pense with  due  notice  of  the  dishonor  of  the  bill  being  given  to  the  drawer. 
Then  does  it  make  any  diiference  that  the  bills  were  destroyed  before  they 
came  due?  I  think  not;  for  they  might  till  have  been  paid  with  or  without 
an  indemnity,  and  the  defendant,  not  hearing  that  they  were  dishonored,  might 
have  been  pi-evented  from  pressing  his  remedy  against  the  acceptors.  *  *  • 
If  there  was  an  open  account  between  the  parties,  and  the  acceptors  were 
indebted  in  any  sum  to  the  drawer  before  the  bills  became  due,  I  cannot  say 
that  he  must  necessarily  have  been  aware  beforehand  that  either  of  them 
would  be  dishonored."    See,  also,  Donnelly  v.  Howie,  Hayes  &  J.  436. 

226  Thackray  v.  Blackett,  3  Camp.  164;  Legge  v.  Thorpe,  12  East,  171.  Thus, 
in  the  case  of  Blackhan  v.  Doren,  2  Camp.  503,  it  was  held  that  if  the  drawer 
of  a  bill  of  exchange,  when  presented  for  acceptance,  has  effects  in  the  hands 
of  the  drawees,  though  he  is  indebted  to  them  for  a  much  larger  amount,  and 
they,  without  his  knowledge,  have  appropriated  these  effects  to  the  satisfaction 
of  the  debt,  he  is  entitled  to  notice  of  dishonor  for  nonacceptance,  as  he  might 
expect  under  these  circumstances  that  the  bill  would  be  accepted  and  paid. 
See,  also,  Carew  v.  Duckworth,  L.  R.  4  Exch.  313;  Hopkirk  v.  Page,  2  Brock. 
34,  Fed.  Cas.  No.  6,007. 

226  Scholefield  v.  Eichelberger,  7  Pet.  5S6;  U.  S.  v.  Grossmayer,  9  Wall.  73; 
Berry  v.  Southern  Bank,  2  Duv.  379;  James  v.  Wade,  21  La.  Ann.  548  (this 
case  holds  that  the  holder  of  commercial  paper  must  use  all  other  means  pos- 
sible to  give  notice  to  the  party  to  be  charged  when  by  reason  of  circumstances 
the  mail  cannot  be  used). 

227  Billgerry  v.  Branch,  19  Grat.  393;  Morgan  v.  Bank  of  Louisville,  4  Bush. 
82;    Norris  v.  Despard,  38  Md.  491;    Tunno  v.  League,  2  Johns.  Cas.  1.    As 


Ch.   9]       EXCUSES    FOR    FAILURE    TO   PRESENT    OR   TO    GIVE    NOTICE.         375 

pension  of  commercial  intercourse  by  superior  force,  such  as  the 
public  and  positive  prohibition  of  commerce,  occupation  of  a  coun- 
try by  public  enemies,-^^  and  the  like,  also  exonerate  the  holder 
from  presentment  and  notice.  The  interest  of  the  public  forbids 
such  acts,  and  therefore  the  individual  cannot  be  held  responsible 
if  he  fail  to  perform  them.  Thus,  the  public  policy  forbids  com- 
munication with  districts  infected  by  such  plagues  as  the  cholera 
or  yellow  fever,  because  public  safety  requires  their  quarantine. 
Hence,  even  if  the  matter  be  not  regulated  by  express  statute,  as 
it  is  in  some  states,  the  doctrines  of  the  common  law  forbid  all 
business  intercourse  with  the  inhabitants  of  such  districts.  But 
the  other  rule  of  the  common  law,  that  inability  to  perform  the 
terms  or  conditions  of  a  contract  by  reason  of  inevitable  accident 
or  casualty  constitutes  no  excuse  for  non-performance,  does  not  ap- 
ply to  the  presentment  of  negotiable  instruments  and  notice  of 
their  dishonor,  because  questions  of  presentment  and  notice  depend 
upon  due  diligence.  The  holder,  if  he  has  used  due  diligence  in  pre- 
senting the  bill  or  note,  and  in  notifying  parties  of  its  dishonor,  has 
done  all  the  law  requires  of  him.  Diligence  on  his  part  is  meas- 
ured by  the  general  convenience  of  the  commercial  world,  and  the 
practicability  of  accomplishing  the  end  required  by  ordinary  skill, 
caution,  and  effort.'^ ^®  And  it  only  requires  that  demand  and  no- 
tice must  be  made  and  given  within  a  reasonable  time  after  the  im- 
pediment is  removed.  This  rule  also  does  not  apply  to  indorsers, 
unless  the  objection  applies  to  them.  For  example,  where  a  maker 
or  acceptor  is  in  a  beleaguered  town,  and  so  inaccessible,  it  is 
merely  the  presentment  to  him  which  is  excused.  The  indorser's 
liability  should  be  at  once  fixed  by  sending  him  notice;  and,  if  the 
indorser  can  be  notified,  notice  to  him  is  not  excused,  for  the  law 
merchant  insists  on  compliance  with  its  formalities  as  far  as  thej 
can  be  observed.^ ^° 

holding  that  the  illness  of  one's  wife  will  not  excuse  delay  in  giving  notice 
of  dishonor,  see  Turner  v.  Leach,  Chit.  Bills  &  N.  (10th  Ed.)  332,  note  13. 

2  28  Polk  V.  Spinljs,  5  Cold.  431;   Tardy  v.  Boyd,  26  Grat.  632. 

22  9  Windham  Bank  v.  Norton,  22  Conn.  213;  Patience  v.  Townley,  2  J.  P. 
Smith  (Eng.)  223;  Farmers'  Bank  v.  Gunnell,  26  Grat  131;  Schofield  v.  Bay- 
ard, 3  Wend.  488. 

230  Foster  v.  Julien,  24  N.  Y.  28;   Spies  v.  Gilmore,  1  N.  Y.  321;    McGruder 


376  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  [Ch.   9 

In  cases  of  absence,  death,  or  inability  to  discover  the  resi- 
dence of  the  maker  or  acceptor,  the  question  is  one  of  diligence. 
When  the  maker  of  a  note  or  acceptor  of  a  bill  has  absconded,  that 
will  ordinarily  excuse  a  demand,  and  notice  of  the  fact  is  sufficient 
to  hold  all  the  indorsers.^^^  Where  the  maker  or  acceptor  is  a  sea- 
man on  a  voyage,  having  no  domicile,  the  indorser  is  liable  with- 
out a  demand  being  made;*'*  and  in  every  case  where  the  maker 
or  acceptor  has  no  known  place  of  residence,  or  place  at  which 
the  note  can  be  presented,  the  holder  will  in  like  manner  be 
excused  from  making  any  demand  whatever.*^'  The  commonest 
instance  of  this  last  general  statement  is  where  the  maker  or 
acceptor  removes  from  the  state,  and  continues  to  reside  abroad 
until  its  maturity.  It  is  deemed  in  such  cases  a  better  business 
rule  that  the  holder  shall  not  be  bound  to  seek  out  the  maker  or 
acceptor  or  his  place  of  residence  in  the  state  to  which  hi-  bus  re- 
moved for  the  purpose  of  presenting  the  instrument  and  demanding 
paj'ment.*^*  It  is  probably  also  the  law  that  he  is  not  bound  to 
present  it  at  the  last  known  place  of  residence  or  business  of  the 
maker  or  acceptor,  though  the  cases  are  not  explicit  on  this  point. 
The  most  that  is  said  is  that  a  presentment  will  be  sufficient  if  made 
at  the  last  known  place  of  residence  or  of  business;  *'"  but  it  prob- 
ably would  not  be  enjoined  upon  the  holder  that  it  be  done,  because 
such  a  formality  would  be  of  no  practical  value.  In  case  of  death 
of  the  maker  or  acceptor,  the  general  principle  which  we  have 
stated  above  governs  the  case.  If  the  instrument  is  made  payable 
at  a  bank  or  other  particular  place,  it  must  be  still  presented  there. 
If  its  presentment  be  impossible,  because  of  the  death  of  the  maimer 
or  acceptor,  and  no  one  can  be  found  to  whom  to  make  presentment, 

V.  Bank  of  Washington,  9  Wheat.  (598.  In  this  case,  it  was  held  that  a  re- 
moval to  another  state  by  the  maimer  excuses  actual  demand.  Juniata  Bank 
V.  Hale,  16  Serg.  &  R.  157;   Gibbs  v.  Cannon,  9  Serg.  &  R.  201. 

231  Putnam  v.  Sullivan,  4  Mass.  45;  Lehman  v.  Jones,  1  Watts  &  S.  12G; 
Taylor  v.  Snyder,  3  Denio,  145. 

23  2  Barrett  v.  Wills,  4  Leigh,  114. 

2  33  Erwm  V.  Adams,  2  La.  318;   Adams  v.  Leland,  30  N.  Y.  309. 

2  34  Anderson  v.  Drake,  14  Johns.  114. 

23  5  Adams  v,  Leland,  30  N.  Y.  309;  Foster  v.  Julien,  24  N.  Y.  28;  Mc- 
Gruder  v.  Bank  of  Washini^tou,  9  Wheat.  598;  Dennie  v.  Walker,  7  N.  H. 
199;  Wheeler  v.  Field,  G  Mete.  (Mass.)  290;  Herrick  v.  Baldwin,  17  Minn. 
209  (Gil.  183);  Gist  v.  Lybrand,  3  Ohio,  308;  Central  Bank  v.  Allen,  IG  Me.  41. 


Ch,   9]       EXCUSES    FOR    FAILURE    TO    PRESENT    OR    TO    GIVE    NOTICE.  377 

its  presentment  will  be  excused.  If  a  personal  representative  has 
been  appointed,  presentment  and  demand  must  be  made  to  him.^^' 
And  if  there  is  no  personal  representative,  and  at  the  time  of  his 
death  the  maker  or  acceptor  had  a  known  place  of  residence,  pre- 
sentment should  be  made  at  his  former  residence.^^^  In  this  case, 
as  in  all  others,  the  death  of  the  acceptor  or  maker  never  dispenses 
with  notice  to  the  drawers  and  indorsers  of  the  fact  of  non-accept- 
ance or  of  non-payment.*'* 
Waiver  of  Notice. 

The  third  class  of  cases  mentioned  in  the  principal  text  is  what 
is  known  as  "waiver."  It  may  be  of  two  kinds:  (1)  Expressed  in 
words;  or  (2)  implied  from  acts.^^^  It  rests  upon  the  doctrine  of 
estoppel ;  for,  when  presentment  of  a  bill  or  note  at  maturity  or  no- 
tice of  its  dishonor  has  been  dispensed  with  by  prior  agreement,  it 
would  be  a  fraud  upon  the  holder  to  hold  him  to  the  law  merchant, 
and  to  permit  him  to  suffer  by  acting  upon  the  assurance  of  the 
party  to  whom  he  looks  as  security  upon  the  paper.  And  it  is  fair 
that  this  should  be  enforced  against  the  indorser,  for  the  conditions 
of  presentment  and  demand  are  for  his  benefit  alone,  and,  if  he 
chooses  to  waive  them,  he  is  to  be  estopped  from  denying  his 
waiver.  The  commonest  forms  of  express  waiver  are  the  words 
"presentation  and  protest  waived,"  or  "notices  and  protest  of  non- 
acceptance  waived,"  or  words  similar  in  form  and  import,  written  or 
printed  on  the  face  of  the  bill,  or  over  some  or  all  the  indorsements, 
or  else  on  a  separate  piece  of  paper.**°  Where  it  is  written  on  the 
face  of  the  bill  or  note,  it  applies  to  all  the  parties.-*^  Where  it  is 
written  over  some  or  all  the  indorsements,  it  applies  only  to  those 
indorsements  over  which  it  is  written.***     Where  it  is  written  on  a 

236  iMagrudei-  v.  Union  Bank  of  Georgetown,  8  Curt.  Dec.  299,  3  Pet.  87; 
Toby  V.  Maurian,  7  La.  493;  Harp  v.  Kenner,  19  La.  Ann,  63;  Gower  v. 
Moore,  25  Me.  16;    Sboenberger  v.  Lancaster  Sav.  Inst.  28  Pa. -St.  459. 

237  Bank  of  Washington  v.  Reynolds,  2  Crancb,  C.  C.  289,  Fed.  Cas.  No.  954 

23  8  Oriental  Bank  v.  Blake,  22  Pick.  208. 

230  Fuller  v.  McDonald,  8  Greenl.  213.    Porthouse  v.  Parker,  1  Camp.  82. 

24  0  Spencer  v.  Harvey,  17  Wend.  489. 

241  Bryant  v.  Merchants'  Bank,  8  Bush,  43;  Farmers'  Bank  of  Kentucky  v. 
Ewing,  78  Ky.  266;   Lowry  v.  Steele,  27  Ind.  170. 

242  Woodman  v.  Thurston,  8  Cush.  157;  Central  Bank  v.  Davis,  19  Pick. 
373. 


378  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  [Ch.    9 

separate  piece  of  paper,  the  instrument  is  to  be  construed  accord- 
ing to  its  terms.  In  extent,  the  waiver  is  construed  to  apply  only 
to  the  acts  which  it  specifies.  Sometimes  notice  alone  is  waived;  '*• 
sometimes  presentment;  sometimes  protest,  in  which  last  case  the 
term  "protest''  is  deemed  to  include  all  the  formal  facts  which  con- 
stitute dishonor.-**  Any  act,  course  of  conduct,  or  language  of  the 
drawer  or  indorser  calculated  to  induce  the  holder  not  to  make  de- 
mand or  protest  or  give  notice,  or  to  put  him  off  his  guard,  or  any 
agreement  by  the  parties  to  that  effect,  will  dispense  with  the  neces- 
sity of  taking  these  steps  as  against  any  party  so  dealing  with  the 
holder.^*"  The  reason  for  this  is  that  the  conditions  of  demand  and 
notice  are  for  the  benefit  and  protection  of  the  drawer  and  in- 
dorser; and  when  his  acts  are  such  that  the  court  cannot  protect 
him  without  sanctioning  a  fraud  or  wrong,  or  when  the  drawer  and 
indorser  himself  waives  these  proceedings,  and  consents  to  be 
bound  without  them,  he  is  bound.  A  party  to  a  contract  may  re- 
nounce the  benefit  of  any  stipulation  in  it  designed  for  his  own  pro- 
tection.^*®  ♦ 

When  Drawer  or  Indorser  is  Secured. 

The  fourth  and  last  class  is  when  the  drawer  or  indorser  is  fully 
secured,  and  has  promised  to  see  to  the  payment  of  the  paper,^*^ 
and  so  there  is  no  reason  for  the  enforcement  of  the  rule  in  his  be 
half.     As  we  have  already  said,  one  of  the  principal  objects  of  no- 

243  Backus  V.  Shipherd,  11  Wend.  G29;  Berkshire  Bank  v.  Jones,  6  Mass. 
524;   Burnham  v.  Webster,  17  Me.  50. 

244  Coddington  v.  Davis,  1  N.  Y.  186;   Porter  v.  Kimball,  53  Barb.  467. 

246  story.  Bills,  §  317;  Andrews  v.  Boyd,  3  Mete.  (Mass.)  434;  Norton  v. 
Lewis,  2  Conn.  478;  Taunton  Bank  v.  Richardson,  5  Pick.  436;  Leonard  v. 
Gary,  10  Wend.  504;  Boyd  v.  Cleveland,  4  Pick.  525;  Phipson  v.  Kneller,  4 
Camp.  285,  1  Starkie,  116.  In  this  case  Lord  Ellenborough  said:  "No  legal 
proposition  can  be  more  clear  than  that  where  a  party  says:  'My  residence  is 
immaterial.  I  will  inquire  whether  the  bill  is  paid,'— he  thereby  takes  upon 
himself  the  onus  of  makuig  inquiry,  and  dispenses  with  notice."  Whitfield 
V.  Savage,  2  Bos.  &  P.  277;  Mead  v.  Small,  2  Greenl.  207;  Hoover  v.  Mc- 
Cormick,  84  Wis.  215,  54  N.  W.  505,  Johns.  Cas.  Bills  &  N.  134. 

24  6  Sheldon  v.  Horton,  43  N.  Y.  93;  Pugh  v.  McCormick,  14  Wall.  361;  Rey- 
nolds V.  Douglass,  12  Pet.  497;  Cady  v.  Bradshaw,  116  N.  Y.  188,  22  N.  E. 
371;   Ross  V.  Hurd.  71  N.  Y.  14. 

247  See  reasons  and  cases  cited;   Tied.  Com.  Paper,  §  362. 


Ch.   9]       EXCUSES    FOR    FAILURE    TO    PRESENT    OR    TO    GIVE    NOTICE.  379 

tice  is  to  enable  the  indorser  to  obtain  indemnity  from  the  princi- 
pal, and  this  has  already  in  such  case  been  attained.  But  the  mere 
precaution  by  an  indorser  of  taking  security  from  his  principal  does 
not  operate  as  a  dispensation  of  a  regular  demand  and  notice. 
There  must  be  something  more,  such  as  taking  into  his  possession 
the  funds  or  property  of  the  principal,  sufficient  for  the  purpose  of 
meeting  the  payment  of  the  bill  or  note,  or  he  must  have  an  assign- 
ment of  all  the  property,  real  and  personal,  of  the  makers  for  that 
purpose.  The  notice  is  dispensed  with  when  funds  are  received, 
and  nc"  Mntil  then.^**  But  even  in  such  cases  the  indorser  does 
not  dispense  with  the  necessity  of  presentment  for  payment;^** 
and  also,  if  the  security  be  partial,  and  not  entire,  the  notice  will 
not  be  disptgnsed  with.*^"  The  test  in  such  cases  is  whether  any 
damage  has  arisen  from  the  failure  to  give  this  notice.  If  it  ap- 
pears that  no  damage  could  have  been  suffered  by  the  indorser,  then 
preseni^nient  may  be  excused.^**^ 

248  Spencer  v.  Harvey,  17  Wend.  489;   Moses  v.  Ela,  43  N.  H.  557. 
2*»  Seacord  v.  Miller,  13  N.  Y.  55. 
2  50  Mechanics'  Bank  v.  Griswold,  7  Wend.  166. 

2B1  Bond  v.  Farnham,  5  Mass.  170;  Barton  t.  Baker,  1  Berg.  &  R.  334;  Kel 
ley  V.  Mayor,  etc.,  of  Brooklyn,  4  Hill,  263. 


380  CHECKS.  [Ch.  10 

CHAPTER   X. 

CHECKS. 

148-150.  In  General. 

151.  Checks  as  Negotiable  Instruments. 

152-154.  Presentment  and  Notice  of  Dishonor— Effect  of  Delay. 

155.  Rights  of  Holder  against  Bank. 

156-159.  Certification  and  Acceptance  of  Checks. 

IGO.  Failure  of  Bank  to  Honor  a  Check. 

IN  GENERAL. 

148.  A  check  is  a  draft  or  order  on  a  bank  or  banker, 
purporting  to  be  drawn  on  a  deposit  of  funds,  for  the 
payment,  at  all  events,  of  a  certain  sum  of  money  to  a 
certain  person  therein  named,  or  to  him  or  his  order,  or 
to  bearer,  and  payable  instantly  on  demand.^ 

149.  A  check  resembles  an  inland  bill  of  exchange  pay- 
able on  demand,  except  that  it  is  al-wrays  drawn  on  a 
banker;  and  many,  but  not  all,  of  the  rules  governing  a 
bill,  are  applicable  to  it. 

150.  In  some,  but  not  all,  states,  an  instrument,  in  the 
form  of  a  check,  drawn  in  one  state  on  a  banker  in 
another  state,  is  held  to  be  a  foreign  bill  of  exchange, 
and  not  a  check. 

The  following  is  the  ordinary  form  of  a  check: 

Chicago,  HI,  Aug.  1st,  1895. 
First  National  Bank  of  Chicago,  111. 
Pay  to  Adam  Smith  or  order  [or  to  Adam  Smith  simply,  or  to 
Adam  Smith  or  bearer,  or  simply  to  hearer'] 

Five  hundred  and  ■* Yioo Dollars. 

$500  "/iP»  John  Jones. 

1  Van  Schaack,  Bank  Checks,  1,  citing  Blair  v.  Wilson,  28  Grat.  (Va.)  170; 
Story,  Prom.  Notes  (7th  EdL)  §  487;  2  Daniel,  Neg.  Inst  (3d  Ed.)  §  1566. 


Ch.   10]  IN    GENERAL.  331 

John  Jones  is  the  drawer;  the  First  National  Bank  of  Chicago, 
111.,  is  the  drawee;  Adam  Smith  is  the  payee;  and  the  payee,  while 
he  holds  the  cheek,  or  any  person  who  holds  it  by  transfer  from  him, 
is  called  the  "holder." 

A  check  is  in  form  similar  to  an  inland  bill  of  exchange,  the  only 
difference  being  that  it  is  drawn  on  a  bank  or  banker.  The  English 
bill  of  exchange  act  defines  a  check  as  a  "bill  of  exchange,  drawn  on 
a  banker,  payable  on  demand."  As  we  shall  presently  see,  more 
at  length,  however,  a  check  is  not  a  bill  of  exchange,  though  it  is 
similar  in  form,  and  though  many  of  the  incidents  of  a  bill  attach 
to  it.  In  view  of  its  resemblance  to  a  bill  in  form,  the  rules  govern- 
ing the  form  of  bills,  their  alteration,  the  capacity  of  the  parties 
thereto,  etc.,  apply  to  it,  and  it  is  unnecessary  to  do  much  more  than 
refer  to  what  has  been  said  in  this  regard  in  speaking  of  bills.  A 
few  points,  however,  may  well  be  noticed  shortly. 

A  check,  in  order  to  render  the  bank  liable  to  the  drawer  for  fail- 
ure to  pay  it,  and  to  protect  the  bank  in  paying  it,  should  it  turn 
out  to  be  invalid  for  any  reason  as  between  the  drawer  and  payee, 
should  be  dated.  The  fact  that  a  check  is  not  dated  would  naturally 
be  held  sufficient  to  put  the  bank  on  inquiry.^  It  is  even  said  that  an 
undated  check  is  never  payable.'  It  need  not  be  dated  on  the  day 
of  its  issuance,  but  may  be  dated  on  a  prior  or  subsequent  day.  In 
the  former  case  it  is  called  an  "antedated"  check;  in  the  latter,  a 
"postdated"  check.  A  postdated  check  is  payable  on  demand 
or  at  any  time  after  its  date.  To  be  a  check,  the  order  must  be 
drawn  on  a  bank  or  banker.  If  drawn  on  any  other  person,  it  is  a 
bill  of  exchange,  and  not  a  check.  It  need  not  appear  on  the  face 
of  it  that  the  drawee  is  a  banker,  but  it  is  safer  that  this  should  ap- 
pear, for  it  has  been  said  that  otherwise  a  bona  fide  holder  without 

2  Under  the  English  bill  of  exchange  act.  It  seems  that  a  check,  like  a  bill 
of  exchange,  need  not  be  dated;  that,  when  undated,  it  is  payable  on  demand, 
"because  no  time  of  payment  is  expressed."  Smith,  Bills,  C  &  N.  127.  If 
there  is  a  blank  left  for  the  date,  the  holder  has  implied  authority  to  insert 
the  true  date;  but  if  he  inserts  an  untrue  date,  without  the  drawer's  consent, 
he  alters  the  check,  and  an  alteration  of  the  date  renders  the  check  void.  See 
Van  Schaack,  Bank  Checks,  2,  3;  Crawford  v.  West  Side  Bank,  100  N.  Y.  50, 
2  N.  E.  881. 

3  Van  Schaack,  Bank  Checks,  2,  citing  Morse,  Banks  (2d  Ed.)  253. 


382  CHECKS.  [Ch.  10 

knowledge  that  it  is  drawn  on  a  banker  may  treat  it  as  a  bill  of  ex- 
change. Like  a  bill,  a  cheek  must  contain  an  order;  the  order  must 
be  for  the  payment  unconditionally  and  at  all  events;  and  it  must 
be  for  the  payment  of  a  certain  sum  of  money.  Though  the  con- 
trary- has  been  held  in  some  jurisdictions,*  yet  by  the  great  weight  of 
authority  it  is  essential  that  a  check  shall  be  payable  instantly  on 
demand;  so  that  if  an  instrument,  though  otherwise  in  the  form  of 
a  check,  and  drawn  on  a  bank,  orders  payment  on  a  day  subsequent 
to  its  date,  it  is  not  a  check,  but  a  bill  of  exchange,  and  subject, 
therefore,  to  all  the  rules  governing  bills  of  exchange, — the  rule,  for 
instance,  allowing  days  of  grace. "^  A  check  must  order  payment  to 
a  person  named  in  it,  or  to  a  person  or  his  order,  or  to  a  person  or 
bearer,  or  simply  to  bearer  without  naming  any  particular  payee. 
Failure  to  designate  a  payee,  or  to  designate  him  with  sulhcient  cer- 
tainty, will  render  the  check  void.^  A  check  payable  to  a  person 
named  is  transferable  by  his  indorsement  in  the  same  manner  as  if 
payable  to  his  order.  A  check  payable  to  a  fictitious  person,  or  or- 
der, or  to  a  name  or  figure  not  standing  for  any  person,  as  "Bills 
Payable,"  "Rent,"  "1G58,"  etc.,  or  order,  are  in  law  regarded  as  pay- 
able to  bearer,  and  are  transferable  by  delivery.''  A  check  must,  of 
course,  be  signed  by  the  drawer,  but  the  place  of  the  signature  is  im- 
material, provided  it  appears  to  have  been  intended  as  a  signature; 
and  it  may  be  in  pencil,  or  printed,  or  stamped,  or  it  may  be  the 
drawer's  mark.^  The  points  of  difi'erence  between  a  check  and  a  bill 
of  exchange  will  be  presently  shown. 

« In  re  Brown,  2  Story,  502,  Fed.  Cas.  No.  1.985;  Champion  v.  Gordon,  70 
Pa.  St.  474. 

B  Bowen  V.  Newell,  8  N.  Y.  190;  Bull  v.  Bank  of  Kasson,  123  U.  S.  105,  8 
Sup.  Ct.  62;  Morrison  t.  Bailey,  5  Ohio  St.  13;  Woodruff  v.  Merchants'  Bank, 
25  Wend.  (N.  Y.)  673;  Harker  v.  Anderson,  21  Wend.  (N.  Y.)  372;  Mintum 
V.  Fisher,  4  Cal.  36;  Brown  v.  Lusk,  4  Yerg.  (Tenn.)  209;  Georgia  Nat  Bank 
V.  Henderson,  46  Ga.  487;   Bradley  v.  Delaplaine,  5  Har.  (Del.)  305. 

6  Van  Schaack,  Bank  Checks,  6;    Daniel,  Neg.  Inst.  (3d  Ed.)  §  1.570. 

7  Vere  v.  Lewis,  3  Term  R.  183;  Willets  v.  Phoenix  Bank,  2  Duer  (N.  T.) 
121. 

8  Van  Schaack,  Bank  Checks,  7,  8.  And  see  Brown  v.  Butchers'  &  Drovers' 
Bank,  6  Hill  (N.  Y.)  443;  Shank  v.  Butsch,  28  Ind.  19;  Com.  v.  Kay,  3  Gray 
(Mass.)  441,  447;   Pennington  v.  Baehr,  48  Cal.  565. 


Ch.    10]  IN    GENERAL.  SSii 

Memorandum  Checks. 

It  is  necessary  to  notice  shortly  a  class  of  checks  of  a  peculiar  char- 
acter, known  as  "memorandum  checks,"  In  form  and  appearance 
a  memorandum  check  does  not  differ  from  ordinary  checks,  except 
that  on  the  face  of  them  is  written  the  word  "memorandum,"  or 
"mem.,"  or  "memo."  Such  a  check  "is  given  by  the  maker  to  the 
payee  rather  as  a  memorandum  of  indebtedness  than  as  a  payment. 
Between  those  parties  it  is  considered  as  a  duebill,  or  an  I.  O.  IT. 
It  can  be  sued  upon  as  a  promissory  note,  without  presentment  to 
the  bank,  whereas  the  holder  of  a  regular  check  must  first  demand 
its  payment  at  bank,  and  be  refused,  before  he  can  maintain  an 
action  against  the  drawer."^  The  fact  that  the  word  "memoran- 
dum," or  "mem.,"  or  "memo.,"  is  written  on  a  check,  makes  it  a  memo- 
randum check.  The  bank,  however,  is  not  bound  to  pay  any  atten- 
tion to  these  words,  or  to  recognize  any  contract  as  implied  between 
the  maker  and  payee  which  gives  the  check  any  peculiar  character. 
If  such  a  check  is  presented  for  payment,  and  the  drawer  has  suffi- 
cient funds  to  meet  it,  the  bank  must  honor  it  like  any  ordinary  check. 
If  the  agreement  between  the  maker  and  payee  is  that  it  shall  not 
be  presented  for  payment,  any  remedy  of  the  drawer  for  the  breach 
of  such  agreement  is  solely  against  the  payee.^" 

A  memorandum  check  presents  all  the  features  of  other  negotiable 
instruments  when  transferred  or  indorsed  to  a  bona  fide  holder  for 
value.^^  "A  memorandum  check  is  a  contract  by  which  the  maker 
engages  to  pay  the  bona  fide  holder  absolutely,  and  not  upon  a  con- 
dition to  pay  if  the  bank  upon  which  it  be  drawn  should  not  pay  upon 
presentation  at  maturity',  and  if  due  notice  of  the  presentation  and 
nonpayment  should  be  given."  ^* 
Drafts  on  a  Bank  in  Another  State. 

It  would  seem  that  a  draft  in  the  form  of  a  check  drawn  in  one 
state  on  a  bank  in  another  state  should  not  be  regarded  as  a  check, 
but  as  a  foreign  bill  of  exchange,  and  therefore  subject  to  the  rules 

9  Van  Schaack,  Bank  Checks,  184. 

10  Morse,  Banks,  313. 

11  Van  Schaack,  Bank  Checks,  185. 

12  Franklm  Bank  v.  Freeman,  16  Pick.  (Mass.)  535.  See,  also,  as  to  this 
class  of  checks,  Cushing  v.  Gore,  15  Mass.  69;  Dykers  v.  Leather  Manufac- 
turers' Bank,  11  Paige  (N.  Y.)  612. 


384  CHECKS.  [Ch.  10 

goyeming  those  instruments  ;*"  but  the  question  has  not  been  ex- 
pressly decided,  and  there  are  intimations  to  the  contrary.^* 

CHECKS  AS  NEGOTIABLE  INSTRUMENTS. 

151.  A  check  is  not  a  bill  of  exchange,  but  it  is  in  the 
nature  of  a  bill  of  exchange  payable  on  demand,  and  is 
governed  by  most  of  the  rules  applicable  to  such  an  in- 
strument. It  is  subject  to  the  same  rules  as  regards 
transfer,  indorsement,  and  negotiability. 

A  check  is  defined  in  the  English  bills  of  exchange  act  as  "a  bill 
of  exchange  drawn  on  a  banker  payable  on  demand,"  and  it  is  also 
thus  defined  by  some  text  writers  and  judges.^ "^  But,  though  it  is 
true  that  it  is  in  the  form  and  nature  of  an  inland  bill  of  exchange 
payable  on  demand,  and  though  it  is  governed  by  most  of  the  rules 
applicable  to  such  an  instrument,  it  is  not  a  bill  of  exchange,  but  a 
distinct  commercial  instrument.^' 

It  differs  from  a  bill  of  exchange,  for  instance,  in  that  it  is  an  ap- 
propriation of  so  much  money  of  the  drawer  in  the  hands  of  the 
banker  on  whom  it  is  drawn,  for  the  purpose  of  discharging  a  debt  or 
liability  of  the  drawer  to  a  third  person;  whereas  it  is  not  neces- 
sary that  there  should  be  money  of  the  drawer  in  the  hands  of  the 

18  Dickins  v.  Beal,  10  Pet  572,  579;  Bank  of  U.  S.  v.  Daniel,  12  Pet.  3^  52. 

14  See  Roberts  v.  Corbin,  26  Iowa,  315;  Little  v.  Phenix  Bank.  2  Hill.  (N. 
Y.)  425. 

10  See  Whistler  v.  Forster,  14  C.  B.  (N.  S.)  248;  Chalm.  Dills  Exch.  245; 
McLean  v.  Clydesdale  Banking  Co.,  9  App.  Cas.  95. 

i«  Blair  v.  Wilson,  28  Grat.  (Va.)  170;  Merchants'  Nat  Bank  v.  State  Nat 
Bank,  10  Wall  647;  Lynn  v.  Bell,  10  Ir.  C.  L.  400;  Keene  v.  Beard,  8  C.  B. 
(N.  S.)  380;  Hopkinson  v.  Forster,  L.  R.  19  Eq.  76;  Mullick  v.  Radakissen, 
9  Moore,  P.  C.  69.  "In  a  sense,  undoubtedly,  a  check  is  a  species  of  bill  of 
exchange,  and  in  a  sense,  also,  it  is  a  distinct  commercial  instrument;  but 
according  to  the  understanding  of  merchants,  and  according  to  our  statutes, 
these  instruments  were  checks,  and  not  bills  of  exchange.  'A  check  is  an 
order  to  pay  the  holder  a  sum  of  money  at  the  bank,  on  presentment  of  the 
check  and  demand  of  the  monej'.  No  previous  notice  is  necessary;  no  ac- 
ceptance is  required  or  expected;  it  has  no  days  of  grace.  It  is  payable  on 
presentment,  and  not  before.'  Bullard  v.  Randall,  1  Gray,  605,  606."  Minot 
V.  Russ,  156  Mass.  458,  31  N.  E.  489. 


Ch.    10]  CHECKS    AS    NEGOTIABLE   INSTRUMENTS.  3S5 

drawee  of  a  bill  of  exchange.*^  It  also  differs  from  a  bill  of  exchange, 
as  we  shall  see,  in  that,  in  the  case  of  a  bill  of  exchange,  the  drawer 
is  discharged  by  default  of  the  payee  or  holder  in  making  due  pre- 
sentment to  the  drawee,  and  in  giving  notice  in  case  of  dishonor, 
while,  in  the  case  of  a  check,  the  drawer  is  not  discharged  by  delay 
in  presentment,  or  in  giving  notice  of  dishonor,  unless  the  delay  was 
unreasonable  under  the  circumstances,  and,  further  than  this,  unless 
the  drawer  was  prejudiced  thereby,  as  by  failure  of  the  banker  be- 
fore presentment.^*  A  check  is  not  due  until  payment  is  demanded, 
and  the  statute  of  limitations  runs  only  from  that  time.^®  It  further 
differs  from  a  bill  of  exchange  in  that  it  is  always  drawn  upon  a  bank 
or  banker;  ^^  and  that  it  is  payable  immediately  upon  presentment, 
without  the  allowance  of  any  days  of  grace;  ^^  and  that  it  is  never, 
as  a  matter  of  right,  presentable  for  acceptance,  but  only  for  pay- 
ment,^ ^  though,  if  the  holder  requests  and  the  banker  chooses,  the 
latter  may  accept  it.  A  foreign  bill  of  exchange  must  be  protested 
to  hold  the  drawer  or  an  indorser;  but  a  check,  unless  drawn  out  of 
the  state,  in  which  case  perhaps  it  would  be  regarded,  not  as  a  cheeky 
but  as  a  foreign  bill  of  exchange,  need  not  be  protested. 

A  check,  however,  is,  as  stated  above,  in  the  nature  of  an  inland 
bill  of  exchange  payable  on  demand,  and  is  precisely  like  a  bUl  of 
exchange  in  its  incidents,  except  as  above  stated.  Like  a  bill  of 
exchange,  it  is  a  negotiable  instrument,  if  negotiable  in  form,  and  it 
is  subject  to  the  same  rules  as  regards  its  transfer.  It  may  be  trans- 
ferred by  indorsement,  for  instance,  and  the  indorsement  will  im- 
pose upon  the  indorser  the  ordinary  liabilities  which  flow  from  the 

IT  Per  Byles,  J.,  in  Keene  v.  Beard,  8  C.  B.  (N.  S.)  372.  Merchants'  Nat. 
Bank  v.  State  Nat.  Bank,  10  Wall,  604. 

18  Per  Byles,  J.,  in  Keene  v.  Beard,  supra.  Post,  p.  388;  Merchajits'  Nat. 
Bank  v.  State  Nat.  Bank,  supra;  Lester  v.  Given,  8  Bush  (Ky.)  300;  In  re 
Brown,  2  Story,  502,  Fed.  Cas.  No.  1,985. 

19  Merchants'  Nat.  Bank  v.  State  Nat.  Bank,  supra. 

20  Morse  v.  Massachusetts  Nat.  Bank,  Holmes,  209,  Fed.  Cas.  No.  9,857; 
Merchants'  Nat.  Bank  v.  State  Nat.  Bank,  supra;   In  re  Brown,  supra. 

21  Morse  v.  Massachusetts  Nat.  Bank,  supra;  Merchants'  Nat  Bank  v.  State 
Nat.  Bank,  supra;  In  re  Brown,  supra;  Bowen  v.  Newell,  8  N.  Y.  190;  Wood- 
ruff V.  Merchants'  Bank,  25  Wend.  (N.  Y.)  673. 

aa  Morse  v.  Massachusetts  Nat.  Bank,  supra;  In  re  Brown,  supra. 

NKG.  BILLS 25 


386  CHECKS.  [Ch.  10 

indorsement  of  a  bill  of  exchanj^e  or  negotiable  promissory  note.^' 
And  it  makes  no  dilTerence  that  the  check  was  payable  to  bearer, 
for,  lilce  a  bill  or  note  payable  to  bearer,  though  it  is  transferable  by 
mere  delivery,  it  may  also  be  transferred  by  indorsement  of  the  payee, 
or  of  any  subsequent  holder.  In  such  a  case  the  indorser  incurs  the 
same  liabilities  and  obligations  as  the  indorser  of  a  check,  bill,  or 
note  payable  to  order.^* 

A  check,  whether  uncertified  or  certified,  as  will  be  presently 
explained,  by  the  bank  upon  which  it  is  drawn,  passes  to  a  bona 
fide  purchaser  or  transferee  for  yalue  free  from  all  equities  ex- 
isting between  the  drawer  and  the  payee  or  first  holder  of  which 
the  transferee  had  no  notice,  whether  the  check  is  payable  to  bearer 
and  transferred  by  delivery  merely  or  by  indorsement  and  deliv- 
ery, or  is  payable  to  order  and  is  transferred  by  indorsement  and 
delivery.^"^  In  the  latter  case  indorsement  is  necessary  to  protect 
the  holder.'®  The  principles  governing  the  transfer  of  checks  are 
in  this  respect  the  same  as  those  which  govern  the  transfer  of 
negotiable  bills  and  notes.  A  check  not  being  due  until  payment 
is  demanded,  it  cannot,  as  a  rule,  until  then  be  treated  as  overdue, 
and  it  may  at  any  time  be  transferred  to  a  bona  fide  holder;  but 
it  is  held  in  most  jurisdictions  where  the  question  has  arisen  that, 
if  the  check  is  "stale"  when  transferred,  it  is  to  be  regarded  in 
respect  to  its  transfer  like  an  overdue  bill  or  note,  so  that  the 
transferee  will  not  be  protected  against  equities.^^ 

In  Keene  v.  Beard, ^^  where  it  was  held  that  a  check  can  pass 

23  Tliis  was  held  in  Keene  v.  Beard,  supra.  The  name  written  on  the  back 
of  the  check  must  be  intended  as  an  indorsement.  There  must  be  an  animo 
indorsandi.    Keene  v.  Beard,  supra. 

24  Keene  v.  Beard,  supra;   Story,  Prom.  Notes,  §  132. 

2  5  Willets  V.  Phot-nix  Banli,  2  Duer  (N.  Y.)  121;  Whistler  v.  Forster,  14  C.  B. 
(N.  S.)  248. 

2  6  Whistler  v.  Forster,  supra.  In  this  case  it  was  held  that  while  the  bona 
fide  indorsee,  for  value  and  without  notice,  of  a  check  payable  to  order,  is  pro- 
tected against  equities  between  the  drawer  and  the  bank,  a  person  to  whom 
a  check  payable  to  order  is  transferred  unindorsed  is  not  so  protected,  as  the 
transfer  is  a  mere  equitable  assignment. 

27  This  will  be  shown  presently.    Post,  p.  393. 

28  8  C.  B.  (N.  S.)  372. 


Ch.    10]  CHECKS    AS    NEGOTIABLE    INSTRUMENTS.  387 

by  indorsement,  and  ll:e  indorser  is  liable  as  on  an  ordinary  nego- 
tiable instrument,  the  holder  of  a  check  payable  to  the  payee  or 
bearer,  and  indorsed  and  delivered  by  the  payee  to  a  third  per- 
son, and  by  the  latter  to  the  present  holder,  sued  the  payee  on 
his  indorsement,  and  it  was  held  that  he  was  entitled  to  recover.^® 
"The  point  urged"  by  counsel  for  the  defendant,  it  was  said  by 
Erie,  C.  J.,  "was  that  a  check  is  not  to  be  classed  with  bills  of  ex- 
change so  far  as  to  be  capable  of  creating  a  liability  in  an  indorser 
to  the  person  who  may  be  the  holder  or  bearer  of  the  instrument. 
I  think  he  has  failed  to  establish  that  proposition.     A   check  is 
strongly  analogous  to  a  bill  of  exchange  in  many  respects.    It  is 
drawn  upon  a  banker;  and,  though  in  practice  the  banker  does 
not  accept  the  draft,  he  might,  for  aught  I  know,  do  so.     A  check 
has  also  some  of  the  incidents  of  a  bill  of  exchange,  if  not  all;  as, 
in  respect  of  its  passing  by  delivery,^"  and  also  in  respect  of  a 
bona  fide  holder  taking  it  for  value  having  a  better  title  than  the 
person  from  w^hom  he  received  it.     Having  these  incidents   of  a 
bill  of  exchange,  has  it  the  further  incident  of  being  capable  of 
passing  by  indorsement?  that  is,  where  the  indorsement  is  made, 
not  by  merely  placing  the  name  of  the  party  on  the  back  of  the 
instrument,  but  doing  so  with  the  intention  of  passing  the  title 
to  it,  and  of  incurring  all  the  usual  liabilities  of  an  indorser  of  a 
negotiable  instrument?    It  is  admitted  here  that  the  defendant's 
name  was  placed  upon  the  check  animo  indorsandi,  and  therefore 
our  judgment  for  the  plaintiff  is  in  accordance  with  the  real  in- 
tention of  the  parties.     The  indorser  intended  to  give  the  indorsee 
the  security  of  his  name  and  liability  on  the  instrument.    I  also 
think  our  decision  is  in  accordance  with  the  law,  when  we  hold 
that  a  check  is  a  negotiable  instrument,  and  capable  of  indorse- 
ment." 

To  be  negotiable,  a  check  must  be  in  the  form  of  a  negotiable 
instrument.     The  rules  governing  bills  of  exchange  in  this  respect 

2  9  The  defendant  in  this  case  demurred  on  the  ground  that  by  Indorsing 
the  check  he  did  not  render  himself  liable  to  an  action  on  the  check  at  the 
suit  of  a  third  party,  or  bearer,  upon  the  dishonor  thereof. 

30  The  court  is  here  speaking  of  checks  payable  to  bearer,  or  to  A,  or  bearer, 
and  not  of  checks  payable  to  a  person,  or  ci'der. 


388  CHECKS.  [Ch.  10 

apply  equally  to  cliecks.     Thus,  if  a  check  is  payable,  not  abso- 
lutely, but  on  a  contingency,  it  is  not  negotiable.*^ 


PRESENTMENT   AND    NOTICE    OF    DISHONOR— EFFECT    OF 

DELAY. 

152.  The  drawer  of  a  check  is  not  discharged  from  his 
obligation  by  unreasonable  delay  in  presentment  of  the 
check  for  payment,  or  in  giving  him  notice  of  dishonor, 
in  case  of  presentment  and  dishonor,  unless  he  has  been 
actually  prejudiced  thereby;  but  if  he  has  suffered  a  loss 
thereby,  as  by  failure  of  the  bank,  he  is  discharged  ta 
the  extent  of  his  loss. 

153.  In  determining  what  is  a  reasonable  time,  regard 
must  be  had  to  the  nature  of  the  instrument,  the  usage 
of  trade  and  of  bankers,  and  the  facts  of  the  particular 
case.  A  check  is  to  be  deemed  to  have  been  presented 
within  a  reasonable  time  when  presented  according  to  the 
following  rules: 

(a)  If  the  person  who  receives   it  and  the   banker  are 

in  the  same  place,  it  must,  in  the  absence  of 
special  circumstances,  be  presented  during  busi- 
ness hours  of  the  next  secular  day  after  it  is 
received. 

(b)  If  the  person  w^ho  receives  it  and   the  banker  are 

in  different  places,  it  must,  in  the  absence  of 
special  circumstances,  be  forwarded  for  present- 
ment on  the  next  secular  day  after  it  is  re- 
ceived, and  the  agent  to  whom  it  is  sent  must 
present  it  during  business  hours  of  the  next 
secular  day  after  it  is  received  by  him. 

154.  STATUS  OF  "STALE"  CHECK— If  the  delay  in 
presenting  a  check  is  so  unreasonable  as  to  make  the 
check  "stale"  (a  year  and  a  half,  for  instance,  or  perhaps 
five  months,  or  even  less),  the  bank  w^ill  be  put  upon  in- 

81  See  Little  v.  Phenix  Bank,  2  Hill  (N.  Y.)  425. 


Ch.    10]  PRESENTMENT    AND    KOTICE    OF    DISIIONOll.  389 

quiry  as  to  equities  of  the  drawer,  and  w^ill  pay  at  its 
peril;  and  the  check  virill  perhaps  be  treated  like  an  over- 
due bill,  and  cease  to  be  negotiable. 

As  has  been  seen,  delay  in  presenting  a  bill  of  exchange  either 
for  acceptance,  or  for  payment  after  acceptance,  will  operate  to 
discharge  the  drawer  from  his  obligation.  Checks,  however,  in  this 
respect,  stand  on  a  very  different  footing.  A  check  is  not  pre- 
sentable at  all  for  acceptance,  but  is  presentable  for  payment  only, 
though  the  bank,  as  we  shall  see,  may  accept  it  if  it  chooses  and 
the  holder  so  desires.  And  there  is  no  fixed  rule  as  to  the  time 
within  which  a  check  must  be  presented  for  payment.  It  is  pay- 
able on  demand,  and  demand  may  be  made  at  any  time  within  the 
period  of  the  statute  of  limitations.  Certain  consequences  may 
result,  however,  from  delay  in  presenting  a  check,  so  that,  while 
delay  may  not  under  ordinary  circumstances  affect  the  rights  of 
the  holder,  it  is  always  unsafe. 

In  no  case  will  delay  in. presentment  discharge  the  drawer  from 
his  obligation  either  on  the  check  or  on  the  original  consideration, 
unless  it  can  be  shown  that  he  was  prejudiced  thereby.^^  When  a 
man  gives  a  check,  he  should  see  that  he  does  not  withdraw  the 

8  2  Serle  v.  Norton,  2  Moody  &  R.  401,  and  Robinson  v.  Hawksford,  9  Q.  B. 
52,  among  many  other  cases,  sustain  this  proposition.  In  Serle  v.  Norton,  a 
check  dated  March  19th  was  not  presented  until  April  6th,  when  payment  was 
refused.  The  holder  sued  the  drawer,  and  the  latter  pleaded  delay  on  present- 
ment. No  excuse  for  the  delay  was  shown,  but  it  did  not  appear  that  the 
bank  had  failed,  or  that  the  defendant  was  otherwise  prejudiced.  The  plain- 
tiff had  a  verdict.  In  Robinson  v.  Hawksford,  a  check  drawn  on  June  13th 
was  not  presented  for  payment  until  June  28th,  when  payment  was  refused 
by  direction  of  the  drawer  given  on  the  21st.  The  payee  sued  the  drawer, 
who  pleaded  delay  in  presentment.  It  was  held  that  the  delay  was  im- 
material, since  no  inconvenience  resulted,  and  that  the  defendant  was  not 
discharged  from  his  liability  on  the  check,  so  as  to  leave  the  plaintiff  to  sue 
on  the  consideration  for  it.  There  are  many  cases  to  the  same  effect.  See 
Bull  V.  Bank  of  Kasson,  123  U.  S.  105,  8  Sup.  Ct.  62;  Little  v.  Phenix  Bank, 
2  Hill  (N.  Y.)  425,  7  Hill  (N.  Y.)  359;  Hoyt  v.  Seeley,  18  Conn.  353;  Pack  v. 
Thomas,  13  Smedes  &  M.  11;  Purcell  v.  Allemong,  22  Grat.  (Va.)  739;  Howes 
V.  Austin,  35  111.  396;  Heartt  v.  Rhodes,  66  111.  351;  Stevens  v.  Park,  73  111. 
387;  Henshaw  v.  Root,  60  Ind.  220;  Stewart  v.  Smith,  17  Ohio  St  82;  Kinyon 
V.  Stanton,  44  Wis.  479. 


390  CHECKS.  [Ch.  10 

money  that  is  there  to  meet  it.     Allowing  the  money  to  remain  there 
cannot  prejudice  him. 

If  the  delay  is  unreasonable,  and  the  drawer  is  prejudiced  thereby, 
he  will  be  discharged  from  his  obligation,  both  on  the  check  and  on 
the  original  consideration,  to  the  extent  of  his  loss,  but  only  to  that 
extent.^ 3  Thus,  if  the  holder  of  a  check  fails  to  present  it  within 
a  reasonable  time,  and  the  bank  becomes  insolvent,  so  that  the 
drawer  loses  the  whole  amount  of  the  check  which  he  had  on  deposit 
to  meet  it,  the  loss  will  fall  on  the  holder,  and  the  drawer  will  be 
entirely  discharged.  It  would  be  unreasonable  to  permit  the  holder 
to  allow  the  money  to  remain  in  the  bank  indefinitely  at  the  risk  of 
the  drawer,  who  has  no  means  of  protecting  himself.  If  the  bank 
should  pay  the  drawer  50  cents  on  the  dollar,  so  that  he  would  only 
lose  half  the  amount  of  the  check,  he  would  only  be  discharged  as  to 
the  other  half.  If  he  had  no  money  at  all  in  the  bank,  though  the 
bank  might  have  honored  his  check,  he  would  not  be  discharged 
at  all.  In  all  cases  there  must  be  both  unreasonable  delay  and 
prejudice.  "When  a  loss  has  occurred  by  the  check  not  being  pre- 
sented, it  is  necessary  to  inquire  if  there  was  any  unreasonable  de- 
lay. ♦  *  *  Under  ordinary  circumstances,  the  only  rule  is,  that, 
if  things  have  continued  the  same,  and  no  damage  has  arisen  from 
delay  of  presentment,  the  drawer  continues  liable."  ^*  It  is  in  this 
sense  only  that  the  drawer  is  entitled  to  have  his  check  presented 
within  a  reasonable  time. 

In  no  case  will  the  drawer  be  discharged  unless  the  delay  was  un- 
reasonable under  the  circumstances  of  the  particular  case.  If.  the 
bank  on  which  a  check  is  drawn  should  fail  after  issue  of  the  check, 
and  before  presentment,  there  being  no  unreasonable  delay  in  pre- 
senting it,  the  loss  would  fall  on  the  drawer,  and  he  would  continue 
liable  on  the  check,  or  on  the  original  consideration.  Though  the 
question  as  to  what  is  a  reasonable  time  for  presentation  of  a  check 
must  depend  upon  the  circumstances,  it  may  be  laid  down  as  a  gen- 
eral rule,  that  under  ordinary  circumstances,  and  where  the  payee 
or  holder  is  in  the  same  place  where  the  bank  is  located,  the  check 
must  be  presented  during  banking  hours  of  the  next  secular  day 

33  See  the  cases  above  citecl.     And  see  Alexander  v.  Burchfield,  7  Man.  & 
G.  lOGl. 
84  Per  Lord  Denman,  C.  J.,  in  Robinson  v.  Hawksford,  supra. 


Ch.    10]  PRESENTMENT    AND    NOTICE    OF    DISHONOR,  391 

after  the  day  on  which  it  is  received  by  him;  any  longer  delay  will 
be  unreasonable,  and  at  his  peril.'"  If  the  bank  is  located  at  a  dis- 
tant place,  the  check  must  be  mailed  to  that  place  for  collection  not 
later  than  during  business  hours  of  the  next  secular  day  after  its  re- 
ceipt; and  the  person  to  whom  it  is  sent  must  present  it  not  later 
than  during  business  hours  of  the  next  secular  day  after  its  receipt 
by  him.'*  These  rules  apply  under  ordinary  circumstances  only. 
There  may  be  circumstances  under  which  a  greater  delay  would  not 
be  regarded  as  unreasonable.'^ 

In  like  manner,  and  for  the  same  reason,  contrary  to  the  rule  gov- 
erning bills  of  exchange,  the  drawer  of  a  check  is  not  discharged  by 
failure  of  the  holder  to  give  him  notice  of  the  dishonor  of  the  check 
by  the  bank,  unless  he  has  been  prejudiced  thereby."  Notice 
should  be  given,  however,  within  a  reasonable  time  (ordinarily,  not 
later  than  the  next  secular  day  after  the  bank  refuses  payment),  so 
as  to  enable  the  drawer  to  take  steps  to  protect  himself.  If  such  no- 
tice is  not  given,  and  the  drawer  is  prejudiced,  he  will  be  discharged 
pro  tanto.  The  notice  of  dishonor  need  not  be  in  any  particular 
form.  It  may  be  oral  as  well  as  written.  All  that  is  required  is 
that  the  fact  of  dishonor  shall  be  made  known  to  the  drawer." 

35  Alexander  v.  Burchfield,  7  Man.  &  G.  1061,  11  Law  J.  C.  P.  253:  Smith  v. 
Miller,  43  N.  Y.  171j  Bickford  v.  First  Nat.  Bank,  42  111.  238;  Farwell  v.  Cur- 
tis, 7  Biss.  165,  Fed.  Cas.  No.  4,690.  If  the  day  following  the  day  the  check  is 
delivered  is  Sunday  or  a  legal  holiday,  presentation  on  the  next  day  is  in 
time.    O'Brien  v.  Smith,  1  Black,  99. 

3  6  Hare  v.  Henty,  30  Law  J.  C.  P.  302;  Prideaux  v.  Griddle,  L.  R.  4  Q.  B. 
455;  Heywood  v.  Pickering,  L.  R.  9  Q.  B.  428.  This  rule  does  not  apply  where 
the  payee  deposits  the  check  for  collection  in  a  bank  in  the  same  place  where 
he  resides  and  the  drawee  bank  is  located.  In  such  a  case  the  check  must  be 
presented  on  the  next  secular  day  after  it  was  received  by  the  payee.  Smith 
V.  Miller,  43  N.  Y.  171;  Farwell  v.  Curtis,  7  Biss.  165,  Fed.  Cas.  No,  4,090. 

37  See  Freiberg  v.  Cody,  55  Mich.  108,  20  N.  W.  813;  Cox  v.  Boone,  8  W.  Va. 
500;    Firth  v.  Brooks,  4  Law  T.  (N.  S.)  467. 

38  Bull  V.  Bank  of  Kasson,  123  U.  S.  105,  8  Sup.  Ct.  62;  Merchants'  Nat. 
Bank  v.  State  Nat.  Bank,  10  Wall,  607;  Heartt  v.  Rhodes,  60  111.  351;  Les- 
ter V,  Given,  8  Bush  (Ky.)  360;   Stewart  v.  Smith,  17  Ohio  St.  85. 

3  9  Williams  v.  Bank  of  U.  S„  2  Pet,  06;  Mills  v.  Bank  of  U.  S.,  11  Wheat 
431;  Bank  of  Alexandria  v.  Swann,  9  Pet,  33;  Bowling  v,  Harrison,  6  How. 
248,  Immaterial  mistakes  will  not  render  the  notice  ineffectual.  Mills  v. 
Bank  of  U.  S.,  supra;    Denuistouu  v.  Stewart,  17  How.  006. 


392  CHECKS.  [Ch.  10 

It  is  not  neceafiary,  in  the  absence  of  a  statute,  that  a  check  shall 
be  protested  on  refusal  of  the  drawee  to  pay  it,  in  order  to  hold  the 
drawer  thereon;  but  it  is  safer  to  adopt  this  course,  for  the  notary's 
certificate  will  be  prima  facie  proof  of  presentment  and  dishonor. *** 
Protest,  however,  is  not  necessary.  Parol  evidence  of  presentment 
and  refusal  is  sufficient ^ 

The  circumstances  which  will  excuse  the  holder  of  a  check  for 
failure  to  present  it  in  accordance  with  the  rules  above  stated  are, 
with  few  exceptions,  the  same  as  those  which  will  excuse  the  failure^ 
to  present  a  bill  of  exchange.  The  valid  excuses,  which  "are  mostly 
based  upon  the  old  adage  of  the  civil  law,  'Impossibilium  nulla 
obligatio  est,'"  are  thus  stated  by  Mr.  Van  Schaack:  *=^  (1)  Where 
the  drawer  had  not  sufficient  funds  in  the  bank  when  it  was  reason- 
able to  suppose  the  check  would  be  presented;  (2)  where  he  with- 
drew his  funds  before  presentment;  (3)  removal  of  the  drawee 
bank;  (4)  inevitable  accident  or  overwhelming  calamity;  (5)  the 
presence  of  political  circumstances  amounting  to  a  virtual  interrup- 
tion and  obstruction  of  the  ordinary  negotiations  of  trade;  (G)  the 
breaking  out  of  war  between  the  country  of  the  maker  and  that 
of  the  holder;  (7)  occupation  of  the  country  where  the  parties  lived, 
or  where  the  check  was  payable,  by  a  public  enemy,  and  suspension 
of  commercial  intercourse;  (8)  sudden  illness  or  death  of  the  holder 
or  his  agent;  (9)  general  prevalence  of  a  malignant  disease,  such 
as  yellow  fever  or  cholera,  to  such  an  extent  as  to  stop  ail  trade 
in  the  place;  (10)  impossibility  of  reaching  the  bank,  by  reason  of 
snow,  freshets,  or  overwhelming  accidents;  (11)  when  it  was  known 
that  the  check  could  not  be  paid  by  the  bank,  as  because  of  its 
bankruptcy  and  suspension,  or  a  public  and  notorious  injunction 
issued  against  it.*^     Notice  of  the  existence  of  these  circumstances 

40  Townsley  v.  Sumrall,  2  Pet.  170. 

41  Buckner  v.  Finley,  2  Pet  581);  Burke  v.  McKay,  2  How.  66;  Mechanics' 
&  Traders'  Ins.  Co.  v.  Coons,  36  La.  Ann.  271;  Bowling  v.  Harrison,  6  How. 
248;  Williams  v.  Bank  of  U.  S.,  2  Pet.  96;  Moses  v.  Franklin  Bank,  34  Md. 
574;  Nonas  v.  Despard,  38  Md.  491;  Harker  v.  Anderson,  21  Wend.  (N.  Y.) 
372;   Young  v.  Biyan,  6  Wheat.  146;   Union  Bank  v.  Hyde,  Id.  572. 

4  2  Van  Schaack,  Bank  Checks,  53,  54.  And  see  Blair  v.  Wilson,  28  Grat. 
(Va.)  165,  172;  Bell  v.  Alexander,  21  Grat.  1,  6;  Fletcher  v.  Pierson,  69  Ind- 
281;  Lovett  v.  Cornwell,  6  Wend.  (N.  Y.)  3G9;    Rhett  v.  Foe,  2  How.  457. 

43  Van  Schaack,  Bank  Checks,  53-55;    Lovett  v.  Cornwell,  6  Wend.  (N.  Y.) 


Ch.   10]  PRESENTMENT    AND    NOTICE    OF    DISHONOR.  393 

should  be  given  the  drawer,  if  unknown  to  him,  as  soon  as  possible 
and  practicable,  or  the  excuse  will  not  avail.** 
Status  of  a  ''Stale''  Check. 

While,  as  we  have  just  seen,  the  drawer  of  a  check  is  not  dis- 
charged by  unreasonable  delay  of  the  holder  in  presenting  it  for 
payment,  unless  prejudice  can  be  shown  to  have  resulted,  it  is  al- 
ways unsafe  to  delay  presentation,  not  only  because  loss  may  thus 
discharge  the  drawer  or  indorser,  but  for  the  further  reason  that 
a  "stale"  check  is  rightly  looked  upon  with  suspicion,  for  checks 
are  not  supposed  to  remain  long  in  circulation.  The  fact,  therefore, 
that  a  check  is  stale  when  presented  for  payment  has  been  held 
sufficient  to  put  the  bank  upon  inquiry,  so  that,  if  it  pays  such  a 
check  without  inquiry,  it  will  be  held  to  have  done  so  at  its  peril 
in  case  the  check  is  for  any  reason  invalid  as  against  the  maker.*^ 
It  has  also  been  held  that  the  staleness  of  a  check  is  sufficient  to 
put  a  purchaser  of  it  upon  inquiry  as  to  equities  that  may  exist 
between  the  drawer  and  the  payee.*'  No  certain  rule  has  been 
laid  down  for  determining  when  a  check  is  to  be  regarded  as  stale, 
nor  can  any  rule  be  gathered  from  the  decided  cases.  It  seems 
that  a  check  is  not  stale  if  it  is  only  a  few  days,  or  even  a  month, 
old;*^  but  a  check  has  been  held  stale  when  it  was  a  year  and  a 
half  old,**  and  even  where  it  was  five  months  old.** 

369;  ante,  p.  371,  where  excuses  for  nonpresentment  of  bills  of  exchange  are 
shown. 

44  See  Purcell  v.  Allemong,  22  Grat.  (Va.)  739. 

4  5  Daniel,  Neg.  Inst  (3d  Ed.)  §  1632;  Lancaster  Bank  v.  Woodward,  18 
Pa.  St.  357. 

4  6  First  Nat.  Bank  v.  Needham,  29  Iowa,  249;  Skillman  v.  Titus,  32  N. 
J.  Law,  96. 

47  Lester  v.  Given,  8  Bush  (Ky.)  357;  Ames  v.  Meriam,  98  Mass.  294;  First 
Nat.  Bank  v.  Harris,  108  Mass.  514. 

48  Lancaster  Bank  v.  Woodward,  18  Pa.  St.  357. 

4  9  First  Nat.  Bank  v.  Needham,  29  Iowa,  249.  Contra,  Bull  v.  Bank  of  Kas- 
60n,  123  U.  S.  105.  8  Sup.  Ct.  62. 


)94  CHECKS.  [Ch.  10 


RIGHTS  OF  HOLDER  AGAINST  BANK. 

155.  By  the  weight  of  authority,  though  there  are  de- 
cisions to  the  contrary,  -which  are  controlling  in  the  par- 
ticular jurisdictions,  the  holder  of  a  check  has  no  right  of 
action  against  the  bank  on  which  it  is  drawn  for  refusal 
to  pay  it,  unless  the  bank  has  assumed  an  obligation  to 
him  by  certifying  or  accepting  it ;  his  only  remedy  in  such 
a  case  being  against  the  drawer,  and  against  the  indors- 
ers,  if  there  are  any. 

It  would  seem  that  there  is  no  privity  of  contract  between  the 
payee  or  holder  of  a  check  and  the  bank  upon  which  it  is  drawn, 
and,  therefore,  that  the  payee  or  holder  cannot  maintain  an  action 
at  law  against  the  bank  on  its  refusal  to  honor  the  check,  unless 
the  bank  has  expressly,  or  by  its  conduct,  assumed  an  obligation 
to  him;  but  there  is  upon  this  question  a  direct  conflict  in  the  au- 
thorities. Some  of  the  courts  have  held  that  the  check  is  an  equi- 
table assignment  of  the  amount  in  the  hands  of  the  banker  to  the 
payee  or  holder,  and  that  there  is  an  implied  contract  between  the 
bank  and  the  holder,  so  as  to  render  the  bank  liable  to  the  latter 
on  its  refusal  to  pay  the  check.^*^  By  the  weight  of  authority, 
however,  and,  it  would  seem,  on  principle,  there  is  no  assignment, 
nor  privity  of  contract,  and  the  bank  is  not  liable  to  the  holder  of 
an  uncertified  and  unaccepted  check,  either  at  law  or  in  equity. 
His  remedy  is  against  the  drawer,  and  to  the  drawer  only  is  the 
bank  liable  if  its  refusal  to  pay  was  a  breach  of  its  contract.  In 
an  English  case  it  was  held  that  the  holder  of  an  uncertified  check 
could  not  maintain  an  action  at  law  against  the  bank  under  a 
statute  allowing  the  assignee  of  a  chose  in  action  to  sue  thereon  in 

50  Fogarties  v.  State  Bunk,  12  Rich.  Law  (S.  C)  518;  Roberts  v.  Corbin,  2G 
Iowa,  315;  Munn  v.  Burch,  25  111.  35;  Fourth  Nat.  Bank  of  Chicago  v.  City 
Nat.  Bank  of  Grand  Rapids,  68  111.  398;  Union  Nat.  Bank  v.  Oceana  Co. 
Bank.  SO  111.  212;  National  Bank  of  America  v.  Indiana  Banking  Co.,  114 
111.  483,  2  N.  E.  401;  Lester  v.  Given,  8  Bush  (Ky.)  357;  Weinstock  v.  Bell- 
wood,  12  Bush  (Ky.)  139;  McGrade  v.  German  Sav.  Inst.,  4  Mo.  App.  330; 
Zeller  v.  German  Sav.  Inst.,  Id.  401;  Senter  v.  Continental  Bank,  7  Mo.  App. 
532. 


Ch.    10]  CERTIFICATION    AND    ACCEPTANCE    OF    CHKCKS. 


395 


his  own  name  at  law.  "The  bank,"  it  was  said,  "has  made  a  con- 
tract with  the  drawer  that  they  will  honor  his  checks  to  the 
amount  of  his  account.  They  break  that  contract.  How  can  that 
give  a  right  of  action  to  a  third  person?  The  check  is  but  an  order 
to  pay,  and  not  an  absolute  assignment  of  anything,"  °^  In  Hopkin- 
son  V.  Forster  ^^  it  was  held  that  the  bank  is  not  liable  to  the  holder 
in  equity.  "A  check  is  clearly  not  an  assignment  of  money  in  the 
hands  of  a  banker;  it  is  a  bill  of  exchange  °^  payable  at  a  banker's. 
The  banker  is  bound  by  his  contract  with  his  customer  to  honor 
the  check,  when  he  has  sufficient  assets  in  his  hands.  If  he  does 
not  fulfill  his  contract,  he  is  liable  to  an  action  by  the  drawer,  in 
which  heavy  damages  may  be  recovered  if  the  drawer's  credit  has 
been  injured.  I  do  not  understand  the  expressions  attributed  to 
Mr.  Justice  Byles  in  the  case  of  Keene  v.  Beard,  but  I  am  quite 
sure  that  learned  judge  never  meant  to  lay  down  that  a  banker 
who  dishonors  a  check  is  liable  to  a  suit  in  equity  by  the  holder."  " 

CERTIFICATION  AND  ACCEPTANCE  OP  CHECKS. 

156.  By  certifying  a  check  to  be  good,  the  bank  assumes 
an  unconditional  obligation  to  the  holder  presenting  it, 
and  to  every  subsequent  holder,  to  pay  it  on  demand;  and 

61  Schroeder  v.  Centnal  Banl<,  34  Law  T.  (N.  S.)  735,  per  Brett,  J.  And  see 
Gibson  v.  Cooke,  20  Pick.  (Mass.)  15;  BuUard  v.  Randall,  1  Gray  (Mass.) 
605;  Dana  v.  Boston  Third  Nat.  Bank.  13  Allen  (Mass.)  448;  National  Bank 
V.  Millard,  10  Wall.  152;  First  Nat.  Bank  v.  Whitman,  94  U.  S.  343;  Chap- 
man V.  White,  6  N.  Y.  412;  Aetna  Nat.  Bank  v.  Fourth  Nat.  Bank,  46  N.  Y. 
62;  Tyler  v.  Gould,  48  N.  Y.  682;  Attorney  General  v.  Continentil  Life  Ins. 
Co.,  71  N.  Y.  325;  Second  Nat.  Bank  v.  Williams,  13  Mich.  282;  Creveling  v. 
Bloomsbury  Nat.  Bank,  46  N.  J.  Law,  255;  Loyd  v.  McCaffrey,  46  Pa.  St. 
410;  First  Nat.  Bank  v.  Gish,  72  Pa.  St.  13;  Moses  v.  Franklm  Bank,  34  Md. 
574;  National  Commercial  Bank  v.  Miller,  77  Ala.  168;  St.  .John  v.  Romans, 
8  Mo.  383;  Case  v.  Henderson,  23  La.  Ann.  41);  Colorado  Nat.  Bank  v. 
Boettcher,  5  Colo.  183. 

5  2  L.  R.  19  Ea.  74. 

63  This  is  a  careless  use  of  words.  As  we  have  seen,  a  check  is  not  a  bill 
of  exchange,  though  similar  to  such  an  instrument.  It  is  an  order  on  a 
banker,,  and  not  a  bill  of  exchange  on  a  banker. 

64  HopUinson  v.  Forster,  L.  R.  19  Eq.  74. 


S96  CHECKS.  [Ch.  10 

this  obligation  may  be  enforced  by  the  holder  against  the 
bank.  And  a  delay  in  presentment  "wrill  not  discharge  the 
obligatioa. 

157.  The  certification  of  a  check  at  the  instance  of  the 
holder  discharges  the  dra"wer  and  indorsers  from  liability, 
but  the  drawer  is  not  discharged  where  he  himself  has  it 
certified,  and  puts  it  in  circulation.  The  draw^er  w^ill  also 
be  discharged  if  the  holder  takes  the  parol  acceptance  of 
the  bank  instead  of  payment. 

158.  Where  the  drawer  of  a  check  has  no  funds  in  a 
bank  and  the  bank  verbally  promises  the  holder  to  honor 
the  check,  this,  it  has  been  held  (though  there  are  de- 
cisions apparently  to  the  contrary},  is  a  mere  parol  promise 
to  answer  for  the  debt  of  another,  within  the  statute  of 
frauds,  and  cannot  be  enforced.  Bub  such  a  promise 
where  the  bank  has  fands  of  the  drawer,  whether  ex- 
press or  implied,  is  clearly  binding  as  a  promise  to  pay 
its  own  debt. 

159.  Where  a  bank  pays  a  check  to  a  holder  under  an 
unauthorized  indorsement,  and  charges  the  amount  to  the 
account  of  the  draw^er,  it  is  liable  for  the  amount  of  the 
check  to  the  true  holder  on  demand.  The  action,  it  would 
seem,  should  be  brought,  not  on  the  check,  but  on  the 
promise  implied  in  law  from  its  receipt  of  the  money 
from  the  drawer  for  the  true  holder's  use. 

■Certified  Checks — Linhility  of  Bank. 

A  certified  check  is  a  check  which  the  bank  on  which  it  is  drawn 
has  certified  to  be  good,  for  the  purpose  of  assuring  the  holders  of 
it  that  it  will  be  paid  when  presented.  No  particular  form  of 
words  is  necessary.  All  that  is  required  is  that  it  shall  clearly 
appear  that  a  certification  is  intended.  A  bank,  by  certifying  a 
check  as  good,  estops  itself,  as  against  a  bona  fide  holder,  to  deny 
that  it  was  valid  as  a  draft  upon  the  funds  of  the  drawer,  and  would 
not,  for  instance,  be  allowed  to  say  that  it  was  made  payable  to  no 


Ch.    10]  CERTIFICATION    AND    ACCEPTANCE    OF    CHECKS.  397 

one,  and  therefore  void,  for  it  would  be  held  payable  to  bearer;'^* 
nor  would  it  be  allowed  to  dispute  the  genuineness  of  the  drawer's 
signature,  as  against  a  bona  lide  holder,^^  or  the  sufficiency  of 
funds  in  its  hands  to  pay  it.°^  In  reason  it  would  seem  that  the 
certification  of  a  check  is,  as  regards  a  bona  fide  holder,  an  abso- 
lute promise  that  the  check  will  be  paid  on  demand.  It  has  been 
held  in  New  York,  however,  that  the  certification  only  estops  the 
bank  from  denying  that  the  signature  is  genuine,  and  that  there  are- 
sufficient  funds,  leaving  it  free  to  dispute  the  genuineness  of  the 
body  of  the  check  as  to  the  amount  or  as  to  the  payee.°®  If  the 
officer  or  employ^  of  a  bank,  whose  regular  duty  it  is  to  certify 
the  checks  drawn  upon  it,  certifies  a  check  in  excess  of  his  authority, 
the  certification  will  nevertheless  bind  the  bank  as  against  a  bona 
fide  holder  of  the  check.  This,  however,  is  a  question  of  the  law 
of  agency. °* 

The  effect  of  the  certification  of  a  check  by  the  bank  upon  which 
it  is  drawn  is  not  merely  a  declaration  of  the  fact  that  the  maker 
has  sufficient  funds  to  his  credit  to  pay  it;  but  it  is  more.  It  cre- 
ates a  new  and  binding  obligation  on  the  part  of  the  bank.  It 
is  an  appropriation  of  the  funds  of  the  drawer,  to  the  amount  of 
the  check,  to  its  payment,  and  an  unconditional  promise  by  the 
bank  to  make  the  payment  on  demand.  This  promise  the  bank 
impliedly  makes  to  every  subsequent  holder  of  the  check,  and  it 
may  be  enforced  by  him  in  an  action  against  the  bank.^**     In  this 

85  Willets  V.  Phoenix  Bank,  2  Duer  (N.  Y.)  121. 

66  Farmers'  &  Mecbanics'  Bank  v.  Butchers'  &  Drovers'  Bank.  16  N.  Y, 
125;    Commercial  &  Farmers'  Nat.  Bank  v.  First  Nat.  Bank,  30  Md.  11. 

57  Espy  V.  Bank  of  Cincinnati,  IS  Wall.  621. 

68  Marine  Nat.  Bank  v.  National  City  Bank,  59  N.  Y.  67. 

6  9  Farmers'  &  Mechanics'  Bank  v.  Butchers'  &  Drovers'  Bank,  14  N.  Y. 
623,  16  N.  Y,  125;  Meads  v.  Merchants'  Bank,  25  N.  Y.  143;  Cooke  v.  State 
Nat.  Bank,  52  N.  Y.  106;  Merchants'  Bank  v.  State  Bank,  10,  Wall.  604.  It 
Is  otherwise  if  the  officer  or  employe  has  no  authority  to  certify  checks. 
Pope  v.  Bank  of  Albion,  57  N.  Y.  126;  Mussey  v.  Eagle  Bank,  9  Mete.  (Mass.) 
306. 

CO  This  was  held  in  Willets  v.  Phoenix  Bank,  2  Du-ar  (N.  Y.)  121,  and  many 
other  cases  may  be  cited  to  the  same  effect.  See  National  Commercial  Bank 
V.  Miller,  77  Ala.  168;  Florence  Min.  Co.  v.  Brown,  124  U.  S.  385,  8  Sup.  Ct. 
531;  Laclede  Bank  v.  Schuler,  120  U.  S.  511,  7  Sup.  Ct.  644;  Merchants' 
Nat.  Bank  v.  State  Nat.  Bank,  10  WaU.  604;    Farmers'  &  M.  Bank  v.  Butch- 


398  CHECKS.  [Ch.  10 

respect,  as  we  have  seen,  an  uncertified  check  is  on  a  different 
footin*^. 

Delay  in  presenting  a  certified  check  does  not  discharge  the  bank 
from  its  obligation.  "The  obligation  of  the  bank  is  simple  and 
unconditional  to  pay  upon  demand;  and  in  all  such  cases  the  de- 
mand may  be  made  whenever  it  suits  the  convenience  of  the  party 
entitled  to  the  stipulated  payment.  When  the  business  of  a  bank 
is  properly  conducted,  it  is  not  possible  that  it  can  sustain  any 
loss  or  prejudice  from  this  interpretation  of  its  contract, — the  con- 
tract which  it  makes  in  certifying  a  check;  and  it  is  only  where 
delay  ma}'  be  prejudicial  that  the  want  of  due  diligence  may  be 
legally  imputed;  and  operate  as  a  bar  to  a  claim  otherwise  valid. 
*  *  *  There  is  in  realty,  in  good  sense,  no  distinction,  in  the  na- 
ture of  the  liability  created,  between  a  certified  check  and  a  note 
of  the  bank  payable  on  demand.  Each  is  intended  to  circulate  as 
money,  each  is  an  absolute  promise  to  pay  a  specific  sum  upon  de- 
mand, and  laches  in  making  the  demand  is  no  more  imputable  in 
the  one  case  than  in  the  other.  The  only  difference  between  them 
is  that  the  promise  which  in  the  note  is  expressed  in  the  check  is 
implied."" 

Discharge  of  Drawer  and  Indorsers  by  Cerl{ficaiion  or  Acceptance  of  Chech. 
The  certification  of  a  check  at  the  instance  of  the  holder  operates 
as  a  discharge  of  the  drawer  from  his  liability,  the  holder's  only 
remedy  thereafter  being  against  the  bank;  and  in  like  manner  it 
will  operate  as  a  discharge  of  prior  indorsers,  who,  as  to  the  holder, 
occupy  the  same  position  as  the  drawer.  It  is  otherwise,  however, 
if  the  drawer  himself  has  a  check  certified  and  puts  it  in  circulation. 
In  such  a  case  he  remains  also  liable,  unless  there  is  some  agree- 
ment to  the  contrary.  That  certification  at  the  instance  of  the 
holder  discharges  the  drawer  was  held  in  First  Nat.  Bank  v.  Leach.®^ 

ers'  &  D.  Bank,  14  N.  Y.  G23,  16  N.  Y.  125;  Girard  Bank  v.  Bank  of  Pcnn 
Tp.,  39  Pa.  St.  92;  Meads  v.  Merchants'  Bank,  25  N.  Y.  143;  Andrews  v. 
German  Nat.  Bank,  9  Heisk.  (Tenn.)  211;  Mussey  v.  Eagle  Bank,  9  Mete. 
(Mass.)  306. 

61  Willets  V.  Phoenix  Bank,  2  Duer  (N.  Y.)  121.  And  see  the  cases  above 
cited. 

62  52  N.  Y.  350.  To  the  same  effect,  see  Metropolitan  Nat.  Bank  of  Chicago 
V.  Jones,  137  111.  G34,  27  N.  E.  533;    Continental  Nat.  Bank  v.  M.  Cornhauser 


Ch.    10]  CERTIFICATION    AND    ACCEPTANCE    OF    CHECKS.  399 

The  theory  of  the  law,  it  was  there  explained,  is  that,  where  a  check 
is  certified  to  be  good  by  the  bank  upon  which  it  is  drawn,  the 
amount  thereof  is  then  charged  to  the  account  of  the  drawer.  Every 
well-regulated  bank  adopts  this  practice  to  protect  itself,  and  the 
reason  therefor  is  so  strong  that  the  law  presumes  it  is  adopted 
by  the  banks.  It  follows  that  after  a  check  is  certified  the  drawer 
of  the  check  cannot  draw  out  the  funds  in  the  bank  necessai'y  to 
meet  the  certified  check.  The  money  is  no  longer  his.  If  he  appre- 
hended danger  from  the  suspected  failure  of  the  bank,  he  could 
not  draw  out  that  money,  because  it  has  already  been  appropriated 
by  means  of  the  check  thus  certified.  As  to  him,  it  is  precisely 
as  if  the  bank  had  paid  the  money  on  the  check,  instead  of  cer- 
tifying it.  This,  it  is  true,  applies  also  to  the  acceptance  of  a  time 
bill  of  exchange  before  it  is  due.  When  the  drawee  accepts,  it 
is  an  appropriation  of  the  funds  pro  tanto  for  the  service  and  use 
of  the  payee  or  holder  of  the  bill,  so  that  the  money  ceases  hence- 
forth to  be  the  money  of  the  drawer,  and  becomes  that  of  the  payee 
or  holder  in  the  hands  of  the  acceptor.  Yet  the  acceptance  of  a 
time  bill  of  exchange  before  due  does  not  discharge  the  drawer. 
Its  only  effect  is  to  make  the  acceptor  the  primary  party  to  pay 
it.  The  parties  to  a  certified  check,  however,  due  when  certified, 
occupy  a  different  position.  There  the  money  is  due  and  payable 
when  the  check  is  certified,  and  the  holder  of  the  check,  instead  of 
taking  it  when  he  may,  leaves  it  with  the  bank,  and  instead  takes 
the  bank's  certificate  that  it  is  good,  and  its  promise  to  pay  it  on 
demand.  The  law  will  not  permit  a  check,  when  due,  to  be  thus 
presented,  and  the  money  to  be  left  with  the  bank  for  the  accom- 
modation of  the  holder,  thus  changing  the  position  and  increasing 
the  risk  of  the  drawer,  without  discharging  him.  If  the  holder, 
therefore,  chooses  to  have  the  check  certified  instead  of  paid,  he  dis- 
charges the  drawer,  and  his  only  remedy  is  against  the  bank."^ 

&  Co.,  37  lU.  App.  475;  Bom  v.  First  Nat.  Bank,  123  Ind.  78,  24  N.  E.  173; 
Essex  Co.  Nat.  Bank  v.  Bank  of  Montreal,  7  Biss.  193,  Fed.  Cas.  No.  4,532; 
First  Nat.  Bank  of  Washington  v.  Whitman,  94  U.  S.  343,  345;  National 
Commercial  Bank  v.  Miller,  77  Ala.  168. 

G8  First  Nat.  Bank  of  Jersey  City  v.  Leach,  52  N.  Y.  350;  Frermd  v.  Im- 
porters' &  T.  Nat.  Bank,  76  N.  Y.  352;  Minot  v.  Russ,  156  Mass.  458,  31  N. 
E.  489;  Rounds  v.  Smith,  42  111.  245;  Brown  v.  Leckie,  43  111.  497;  Andrews 
V.  German  Nat  Bank,  9  Heisk.  (Teun.)  211;   Larseu  v.  Breene,  12  Colo.  480, 


400  CHECKS.  [Ch.  10 

The  rule  does  not  apply  where  the  drawer  himself  causes  the 
check  to  be  certified,  and  then  puts  it  in  circulation.  In  such  a 
case  the  reason  for  the  rule  does  not  apply,  and  he  also  remains 
liable.'* 

The  same  is  true  where  the  holder  of  a  check  takes  the  parol  ac- 
ceptance of  the  bank  instead  of  payment.  If  the  payee  or  holder  of 
a  check  presents  the  check,  and  the  bank  offers  to  pay  it,  he  cannot, 
instead  of  taking  the  money,  leave  it  with  the  bank,  without  doing 
so  at  his  own  risk.  If  the  bank  fails,  the  drawer  is  discharged,  and 
it  makes  no  difference  that  the  check  was  presented  on  the  same  day 
it  was  received,  and  the  bank  suspended  soon  afterwards,  and  re- 
fused payment,  when  the  check  was  again  presented  on  the  same 
day.  He  might,  it  is  true,  have  waited  until  the  next  day  to  present 
the  check,  without  being  chargeable  with  laches,  but  having  pre- 
sented it  earlier,  and  having  refused  to  receive  payment  when  of- 
fered, he  cannot  hold  the  drawer."" 
Verbal  Acceptance  or  Promise  by  Bank  to  Pay  Check. 

A  bank  may  render  itself  liable  to  the  holder  of  a  check  otherwise 
than  by  a  certification  of  it.  It  may  under  some  circumstances  ren- 
der itself  liable  by  a  verbal  acceptance,  and  a  promise,  express  or 
implied  from  acceptance,  to  pay  it;  and  under  some  circumstances 
an  acceptance  and  promise  may  be  implied  from  its  conduct.  If  the 
drawer  of  a  check  has  no  funds  in  the  bank,  and  the  bank  verbally 

21  Pac.  498;  Mutual  Nat.  Bank  v.  Rotge,  28  La.  Ann.  933:  Nor  is  an  In- 
dorser  discharged  where  he  himself  procures  a  check  to  be  certified,  and 
then  transfers  it.    Mutual  Nat,  Bank  v.  Rotge,  supra. 

64  First  Nat  Bank  of  Jersey  City  v.  Leach,  supra;  Minot  v.  Russ,  supra. 
"When  a  check  payable  to  another  person  than  the  drawer  is  presented  by 
the  drawer  to  the  bank  for  certification,  the  bank  knows  that  it  has  not  been 
negotiated,  and  that  it  is  not  presented  for  paj-ment,  but  that  the  drawer 
wishes  the  obligation  of  the  bauli  to  pay  it  to  tlie  holder  when  it  is  negotiated, 
in  addition  to  his  own  obligation.  But,  when  the  payee  or  holder  of  a  check 
presents  it  for  certification,  the  bank  knows  that  this  is  done  for  the  con- 
venience or  security  of  the  holder.  The  holder  could  demand  payment  if  he 
chose,  and  it  is  only  because,  instead  of  payment,  the  holder  desires  certifica- 
tion, that  the  bank  certifies  the  check  instead  of  paying  it  In  one  case  the 
bank  cei'tifies  the  check  for  the  use  or  convenience  of  the  drawer,  ajid  in  the 
other  for  the  use  or  convenience  of  the  holder."    Minot  v.  Russ,  supra. 

•  6  Simpson  v.  Pacific  Mut.  Life  Ins.  Co.,  44  Cal.  139. 


Ch.    10]  CERTIFICATION    AND    ACCEPTANCE    OF    CHECKS,  401 

promises  the  holder  to  honor  the  check,  it  would  seem  clear  that  this 
is  a  mere  parol  promise  to  answer  for  the  debt  of  the  drawer,  and, 
under  the  section  of  the  statute  of  frauds  requiring  a  promise  to 
answer  for  the  debt  of  another  to  be  in  writing,  not  enforceable 
against  the  bank.  In  Morse  v.  Massachusetts  Nat.  Bank,^"  a  bank 
in  which  the  drawer  of  checks  upon  it  had  no  funds  had  verbally 
promised  the  holder  to  pay  the  checks,  if  deposited  in  some  other 
bank,  and  presented  through  the  clearing  house.  It  was  held  that 
this  was  a  mere  parol  promise  to  pay  another's  debt,  within  the  stat- 
ute of  frauds,  and  that  the  holder,  therefore,  acquired  no  right 
against  the  bank.  And  it  was  held  that  the  reasons  for  holding 
good  a  parol  accommodation  acceptance  of  a  bill  of  exchange  do  not 
apply  to  the  case  of  a  bank  check.  There  are  cases,  however,  ap- 
parently sustaining  the  proposition  that  parol  acceptances  of  checks 
by  the  bank  may  be  enforced  without  regard  to  whether  the  bank 
has  funds  of  the  drawer. 

If  the  bank  has  funds  of  the  drawer,  and  verbally  accepts  the 
check,  and  promises  the  holder,  expressly  or  impliedly,  by  such  ac- 
ceptance, to  pay  it,  the  leaving  of  the  funds  with  the  bank  instead 
of  withdrawing  them  is  a  sufficient  consideration  to  support  the 
promise;  and  the  promise,  being  to  pay  the  promisor's  (the  bank's) 
own  debt  (that  is,  the  debt  it  owes  to  the  drawer),  is  not  within  the 
statute  of  frauds.  The  holder  can  therefore  maintain  an  action 
against  the  bank  on  such  a  promise.^^ 

A  bank  is  entitled  to  a  reasonable  time  in  which  to  ascertain 
whether  the  drawer's  signature  is  genuine,  and  whether  he  has  suffi- 
cient funds  to  meet  the  check,  and  its  retention  of  the  check  for  such 
a  time  cannot  be  construed  as  an  acceptance  of  the  check  and  prom- 
ise to  pay  it.®®  But  if  it  retains  a  check  for  an  unreasonable  time, 
it  runs  the  risk  of  being  held  to  have  impliedly  accepted  the  check 
so  as  to  become  liable  to  the  holder  to  pay  it®" 

66  1  Holmes,  209,  Fed.  Cas.  No.  9,857. 

67  See  the  cases  hereafter  cited.  Espy  v.  Bank  of  Cincinnati,  IS  Wall.  621; 
Mason  v.  Dousay,  35  111.  424;   Bank  of  Rutland  v.  Woodruff.  34  Vt.  89. 

68  Boyd  V.  Emmerson,  2  Adol.  &  E.  184;  Overman  v.  Hoboken  City  Bank,  31 
N.  J.  Law,  563. 

69  First  Nat.  Bank  v.  McMicliaol,  106  Pa.  St.  4G0.  In  New  York  it  has  been 
held  that  a  bank  is  bound  to  know  the  state  of  its  depositor's  account  ira- 

NEG.  BILLS 2() 


402  CHECKS.  [Ch.  10 

Payment  on  Unauthorized  Indorsement. 

Where  a  bank  pays  a  check  to  a  holder  under  an  unauthorized 
indorsement,  and  chargjes  the  check  to  the  account  of  the  drawei', 
it  has  been  held,  though  there  is  a  decision  to  the  contrary,^"  that 
it  is  liable  for  the  amount  of  the  check  to  the  true  holder  on  demand. 

The  action,  however,  it  is  submitted,  should  properly  be  brought, 
not  on  the  check,  but  for  money  had  and  received, — that  is,  on  the 
promise  implied  in  law  from  the  receipt  by  the  bank  of  the  amount 
of  the  check  from  the  drawer  for  the  use  of  the  true  holder.  In 
Bank  of  the  Republic  v.  ;Millard,'^  where  the  court  held  that  the  true 
holder  of  a  check  paid  to  another  under  a  forged  indorsement  can- 
not sue  the  bank  for  refusing  payment  to  him,  in  the  absence  of 
proof  that  it  was  accepted  by  the  bank  or  charged  against  the 
drawer,  it  was  said:  "It  may  be,  if  it  could  be  shown  that  the  bank 
had  charged  the  check  on  its  books  against  the  drawer,  and  settled 
with  him  on  that  basis,  that  the  plaintiff  could  recover  on  the  count 
for  money  had  and  received,  on  the  ground  that  the  rule  ex  aequo 
et  bono  would  be  applicable,  as  the  bank,  having  assented  to  the  or- 
der, and  communicated  its  assent  to  the  drawer,  would  be  consider- 
ed as  holding  the  money  thus  appropriated  for  the  plaintiff's  use,  and 
therefore  under  an  implied  promise  to  him  to  pay  it  on  demand."  In 
Seventh  Nat.  Bank  v.  Cook,'^-  the  supreme  court  of  Pennsylvania, 
purporting  to  apply  the  principle  above  stated,  held  that  the  pay- 
ment of  a  check  to  the  holder  under  an  unauthorized  indorsement, 
the  check  being  charged  to  the  account  of  the  maker,  amounts  to  an 
acceptance,  and  binds  the  bank  to  pay  the  true  holder  on  present- 
ment. It  was  said  in  this  case  that  "it  is,  in  fact,  an  acceptance,  and 
binds  the  bank  as  a  certified  check  does.  It  is  tantamount  to  an  ac- 
ceptance of  a  draft"  It  does  not  seem  right  to  base  this  decision  on 
the  ground  that  the  check  is  accepted  or  certified  by  the  bank, , 
though  the  court  seems  to  have  done  so,  losing  sight,  it  seems,  of  the 
principle  stated  in  Bank  of  the  Republic  v.  Millard,  upon  which  it 

mediately  upon  presentation  of  his  check.  Oddle  v.  JJational  City  Bank,  45 
N.  Y.  736. 

70  First  Nat.  Bank  v.  Whitman,  94  U.  S.  343. 

Ti  10  Wall.  152. 

7  2  73  Pa.  St.  483.  See,  also,  Dodge  v.  National  Exch.  Bank,  20  Ohio  St.  234, 
30  Ohio  St.  1;  Vanbibber  v.  Louisiana  Bank,  14  La.  Ann.  481. 


Ch.  10]  FAILURE  OF  BANK  TO  HONOR  CHECK.  403 

relied.  There  was  in  fact  no  certification  of  the  check,  nor  any  ac- 
ceptance of  it  by  the  bank  on  presentment  which  could  be  construed 
as  a  promise  in  fact  to  the  true  holder  to  pay  the  check.  The  action 
should  not  be  on  the  theory  that  the  bank  has  certified  the  check, 
but  should  be  on  the  theory  that,  having  retained  the  money  in  set- 
tling with  the  drawer  of  the  check,  it  holds  the  same  for  the  use  of 
the  true  holder  of  the  check,  the  action  being  on  the  promise  created 
by  law  for  money  had  and  received. 


FAILURE  OF  BANK  TO  HONOR  CHECK. 

160.  A  bank  having  funds  of  a  depositor  is  bound  to 
honor  his  checks  to  the  amount  of  those  funds,  and,  for  a 
failure  to  do  so,  is  liable  for  at  least  nominal  damages, 
though  no  actual  damage  has  been  sustained.  The  bank, 
however,  must  have  had  a  reasonable  time  since  the  de- 
posit in  which  to  make  proper  entries  on  its  books  so  as 
to  show  the  amount  to  the  depositor's  credit. 

When  a  bank  receives  funds  on  deposit  it  impliedly  contracts  with 
the  depositor  that  it  will  pay  checks  drawn  by  him  to  the  amount  of 
the  deposit,  and  a  failure  to  honor  his  check  when  there  are  sufficient 
funds  to  his  credit  is  not  only  a  breach  of  contract,  but  a  tort  as 
well,  entitling  the  depositor  to  recover  any  damage  he  may  have  sus- 
tained, and  to  recover  nominal  damages,  at  least,  if  no  actual  dam- 
age has  been  sustained.''"     Of  course,  the  check  must  be  drawn 

7  8  It  was  so  held  in  Marzetti  v.  Williams,  1  Barn.  &  Adol.  415.  And  see 
Rolin  V.  Steward,  14  C.  B.  595;  Whitaker  v.  Bank  of  England,  1  Cromp.,  M. 
&  R.  744;  Patterson  v.  Marine  Nat.  Bank,  130  Pa,  St.  419,  IS  Atl.  632;  Gray 
V.  Johnston,  L.  R.  3  H.  L.  1;  National  Mahaiwe  Bank  v.  Peck,  127  Mass.  29S. 
The  rule  also  applies  to  notes  and  acceptances  of  a  depositor  made  payable 
at  the  bank.  Whitaker  v.  Bank  of  England,  1  Cromp.,  M.  &  R.  744;  Robarts 
V.  Tucker,  16  Q.  B.  560.  As  held  in  Marzetti  v.  Williams,  supra,  it  makes  no 
difference  whether  the  action  against  the  bank  for  its  failure  to  pay  a  check 
is  in  form  in  tort  or  in  contract.  In  either  case  it  is  founded  on  the  contract, 
so  as  to  allow  the  recovery  of  nominal  damages.  Nor  does  it  make  any  differ- 
ence that  the  contract  was  implied  instead  of  express;  for  there  is  no  differ- 
ence between  these  kinds  of  contract  except  in  the  mode  of  proof. 


404  ciiKCKS.  [Ch.  10 

properly,  so  as  to  raise  a  duty  on  the  part  of  the  bank  to  pay  it.^* 
To  render  a  bank  liable  for  failure  to  honor  a  check,  the  depositor 
must  have  had  a  right  to  draw  tlie  money.  A  bank  may  refuse  to 
honor  a  check  if  there  are  not  sufficient  funds  to  the  credit  of  the 
depositor,  after  offsetting  a  balance  of  account  due  from  him  to  the 
bank.'^  And  there  must  be  a  sufficient  balance  to  pay  the  check 
in  full,  for  the  bank  cannot  be  required  to  make  a  part  payment. 
The  duty  and  authority  of  a  bank  to  pay  a  check  drawn  on  it  by  a 
depositor  are  determined  by  countermand  of  payment,^"  or  by  notice 
of  the  drawer's  death.  ^^ 

It  is  only  reasonable  that,  after  a  deposit  is  made,  the  bank  should 
be  allowed  a  reasonable  time  in  which  to  enter  the  credit  on  its 
books,  so  that  the  clerk  whose  duty  it  is  to  pay  checks  may  know  the 
amount  to  the  drawer's  credit  If  a  deposit  were  made  with  one 
clerk,  and  a  check  immediately  presented  to  another,  before  he  could 
have  time  to  know  of  the  deposit,  the  bank  would  not  be  liable  for 
failure  to  honor  the  check.  But  if  a  reasonable  time  has  elapsed 
between  the  deposit  and  presentation  of  the  check  the  bank  will  be 
liable,  notwithstanding  the  fact  that  the  credit  was  not  entered,  for 
it  must  keep  proper  books,  and  conduct  its  business  in  a  proper  man- 
ner.''^ 

74  A  bank  is  not  bound  to  honor  a  check  drawn  on  one  of  its  branches  by  a 
depositor  in  another  branch.  Woodland  v.  Fear,  7  El.  &  Bl.  519;  Gray  v.  John- 
ston, L.  R.  3  H.  L.  1. 

TsGarnett  v.  McKewan,  L.  R.  8  Exch.  10;  Schuler  v.  Israel  Bank,  120  U. 
S.  506,  7  Sup.  Ct.  64S.  This  applies  where  the  balance  against  the  depositor 
is  at  another  branch  of  the  bank.    Garnett  v.  McKewan,  supra. 

78  See  Cohen  v.  Hale,  3  Q.  B.  Div.  371;  McLean  v.  Clydesdale  Banking  Co., 
9  App.  Cas.  95. 

7  7  Rogerson  v.  Ladbroke,  1  Bing.  93. 

78  This  was  in  effect  held  in  INIarzetti  v.  Williams,  supra.  In  that  case  a 
depositor,  on  the  17th  of  the  month,  when  he  had  fG9  to  his  credit  in  a  bank, 
drew  a  check  of  that  date  for  £87.  At  11  o'clock  on  the  19th  a  deposit  of  £40 
was  made.  At  3  o'clock  on  the  19th  the  check  was  presented  and  payment  re- 
fused. The  judge  held  that  a  bank  who  received  a  sum  of  money  belonging 
to  his  customer  became  his  debtor  the  moment  he  received  it,  and  was 
bound  to  pay  a  check  drawn  by  sucli  customer  after  the  lapse  of  such  a  rea- 
sonable time  as  would  afford  an  opportunity  to  the  different  persons  in  his 
establishment  of  knowing  the  fact  of  the  receipt  of  such  money,  and  directed 
the  jury  to  find  against  the  banker  if  they  were  of  opinion  that  such  a  rea- 


Ch,  10]  FAILURE  OF  BANK  TO  HONOR  CHECK.  405 

sonable  time  had  intervened  between  the  receipt  of  the  money  at  11  o'cIocIj 
and  the  presentment  of  the  check  at  3.  The  court  said  that  it  could  not  be 
expected  if  a  sum  of  money  was  paid  to  a  clerk  in  a  large  banking  office,  and 
immediately  afterwards  a  check  presented  to  another  clerk  in  a  different  part 
of  the  office,  that  the  latter  should  be  immediately  acquainted  with  the  fact 
of  the  deposit,  but  a  reasonable  time  should  be  allowed  for  that  purpose,  and 
he  told  the  jury  that  they  should  consider  whether  the  banker  ought  or  ought 
not,  between  11  and  3  o'clock,  to  have  had  in  some  book  an  entry  of  the 
deposit  which  would  have  informed  aJl  the  clerks  of  the  state  of  the  account. 
The  jury  found  against  the  bank,  and  the  verdict  was  sustained.  See,  also, 
Whitaker  t.  Bank  of  England,  supra. 


TABLE  OF  CASES  CITED. 


[the  figures  refer  to  pages.] 


Abbott  V.  Hendricks,  182. 
Abel  V.  Alexander,  290. 
Adams  v.  Bletben,  118. 

V.  Cordis,  169. 

V.  Darby,  347,  373. 

V.  Jones,  134. 

V.  King,  62,  63. 

V.  Leland,  340,  376. 

V.  Wright,  369. 
Aetna  Nat.  Bank  v.  Fourth  Nat.  Bank, 

395. 
Agawam  Bank  v.  Strever,  178. 
Agnew  V.  Bank  of  Gettysburg,  342. 
Agra  &  Masterman's  Bank  v.   Leigh- 
ton.  266. 
Alabama  Coal  Min.   Co.  v.  Brainard, 

83. 
Alderson  v.  Langdale,  237. 
Aldridge  v.  Branch  Bank,  271. 
Alexander  v.  Burchfleld,  390,  391. 

V.  Strong,  322. 

V.  Thomas,  36,  40. 
Alger  V.  Scott,  42. 

V.  Thacher,  275. 
Allan  V  Mawson,  62. 
Allen  V.  Brown,  11. 

V.  Coffil.  113. 

V.  Deming,  271. 

V.  Edmonson,  369. 

V.  Edmundson,  364. 

V.  Rescous,  272. 

V.  Hightmere,  130. 

V.  Suydam,  82,  324,  325,  330. 
Allport  V.  Meek,  315. 
Almy  V.  Winslow,  15. 
American  Bank  v.  Jenness.  330. 
American   Exch.   Bank  v.   Blanchard 
15. 


American   Exch.    Nat.   Bank   v.   New 

York  B.  &  P.  Co.,  297. 
Ames  V.  Meriam,  200,  393. 
Ancher  v.  Bank  of  England,  124,  304. 
Ancona  v.  Marks,  187. 
Anderson  v.  Drake,  75,  337,  376. 
V.  Hick,  94. 
V.  Pearce,  33. 
Anderton  v.  Beck,  332. 
Andrew  v.  Blachly,  78. 
Andrews  v.  Boyd,  378. 

V.  Chadbourne,  312,  314. 
V.  Franiilin.   39. 
V.  German  Nat.  Bank,  398,  399. 
V.  Marrett,    290. 
Angle  V.  Insurance  Co.,  234. 
Aniba  v.  Yeomans,  155. 
Anon..  2,  196.  336. 
Anthony  v.  Harrison,  260,  266,  312. 
Appleby  v.  Biddolph,  38. 
Archibald  v.  Argall,  20. 
Ai'mistead  v.  Armistead,  347. 
Armour  v.  McMichael,  295. 
Armstrong,  In  re,  92. 
v.  Caldwell,  347. 
Arnold  v.  Clifford,  272. 
V.  Dresser,  323. 
V.  Patrick,  72. 

V.  Rock  River  V.  U.  R.  Co.,  54. 
V.  Sprague,  68,  77,  93. 
Arnot  V.  Pittston  &  E.  Coal  Co.,  275. 
Artcher  v.  Whalen,  71. 
Artisans'  Bank  v.  Backus,  355. 
Ashurst  V.  Royal  Bank  of  Australia, 

200. 
Atkins  V.  Johnson,  272. 
Atkinson  v.  Hawdon,  242. 

V.  Manks,  7,  77. 
Atlanta  Mining  &  Rolling  Mill  Ca  v. 
Gwyer,  228. 


NEG.BILL8 


(407) 


4U8 


CASES    CITED. 


[The  figm'es  rpfor  lo  pages.l 


Atlantic  Nat,   Bank  of  New   York  v. 

Franklin,  298. 
Atlas  Bank  v.  Doyle,  299. 
Attenborougli  v.  Mackenzie,  81. 
Attorney  General  v.  Continental  Life 

Ins.  Co.,  395. 
Aubert  v.  Maze,  267. 
Auerbacli  v.  Pritchett,  49. 
Aull  Sav.  Bank  v.  City  of  Lexington, 

213. 
Aurey  v.  Fearnsides,  55. 
Auriol  V.  Tliomas,  157. 
Austin  V.  Munro,  G7. 
Averett  v.  Booker,  7,  41,  77. 
AveriU  v.  Wood,  83. 
Avery  v.  Stewart,  79,  333. 
Awde  V.  Dixon,  305. 
Ayer  v.  Tilden,  233. 
Aymar  v.  Beers,  324,  330,  331. 

V.  Sheldon,  127,  328. 
Ayres  v.  Campbell,  13. 


B 


Bachellor  v.  Priest,  46,  283,  325,  342. 
Backhouse  v.  Harrison,  303. 
Backus  V.  Shipherd,  378. 
Bacon  v.  Burnham,  138. 

V.  Dyer.  347. 

V.  Fitch,  63. 
Badgley  v.  Votrain,  133. 
Baer  v.  Leppert,  344. 
Bailey  v.  Armstrong,  112. 

V.  Bidwell,  269,  318. 

V.  Dozier,  352. 
Bainbridge  v.  Firmstone,  259. 
Baird  v.  Underwood,  36. 
Baker  v.  Dening,  58. 
Baldwin  v.  Killian,  267. 
Balfour  v.  Sea  Fire  Life  Assur.   Co., 

258. 
BaU  V.  Allen,  62. 

V.  Powers,  271,  272. 
Ballard  v.  Greenbush,  281. 
Ballingalls  v.  Gloster.  154,  158,  326. 
Bank  v.  Godfrey,  213. 

V.  Orvis,  336. 

V.  Sollenberger,  12. 
Banker  v.  Banker,  218. 
Bank  of  Alexandria  v.  Swann,  78,  369, 
391. 


Bank  of  Alexandria  v.  Young,  348. 
Bank  of  America  v.  Shaw,  368. 
Bank  of  British  North  America  v.  Mer- 
chants' Nat.  Bank,  244. 
Bunk  of  Burlington  v.  Raymond,  325. 
Bank  of  Chenango  v.  Hyde,  177,  178, 

298. 
Bank  of  Columbia  v.  Lawrence,  364- 

367. 
Bank  of  Commerce  v.  Bogy,  7. 

V.  Union  Bank,  58,   143,  145,   148, 
238. 
Bank    of    Cumberland    v.    Mayberry, 

271. 
Bank  of  England  v.  Newman,  21,  22, 

159,  199,  345. 
Bank  of  Ft.    Edward  v.   Washington 

County  Bank,  203. 
Bank    of    Genesee    v.    Patchin    Bank, 

214. 
Bank  of  Ireland  v.  Archer,  101. 

V.  Beresford,    175. 
Bank  of  Jamaica  v.  Jefferson,  131, 133. 
Bank  of  Kentucky  v.  Wister,  198. 
Bank  of  Limestone  v.  Penick,  240. 
Bank  of  Marietta  v.  Pindall,  106. 
Bank  of  Metropolis  v.  Breut,  338. 

V.  New  England  Bank,  295. 
Bank  of  Michigan  v.  Ely,  100. 

V.  Niles,    213. 
Bank  of  Missom-i  v.  Wright,  53. 
Bank    of    NeAV    York    v.    Muskingum 
Branch  Bank  of  Ohio,  215. 
V.  Vanderhorst,  298. 
Bank  of   Old   Dominion   v.   McVeigh, 

355. 
Bank  of  Orleans  v.  Merrill.  34. 

V.  Whittemore,  75. 
Bank  of  Pittsburgh  v.  Neal,  304. 
Bank  of  Republic  v.  Millara,  402. 
Bank  of  Rochester  v.  Gray,  158. 
Bank  of  Rutland  v.  Buck,  177,  298. 

V.  Woodruff,  401. 
Bank  of  Salina  v.  Babcock,  293,  297. 
Bank  of  Sandusky  v.  Scoville,  293. 
Bank   of   Syracuse   v.    HoUister,    334, 

338. 
Bank   of    United   States   v.    Bank   or 
Georgia,  145. 
V.  Carneal,  360,  368. 
V.  Corcoran,  364. 
V.  Daniel,  20,  26.  384. 


CASKS    CITED. 


409 


[The  figures  refer  to  pages.] 


Bank  of  United  States  v.  Davis,  3G1. 

V.  Goddard,  3()3. 

V.  Norwood,  3G5. 

V.  Smith,  171,  341. 

V.  United  States,   1G8,   283. 

V.  Waggener,  226. 
Bank  of  Utica  v.  Bender,  3G4. 

V.  Philips,  334. 

V.  Smith,  334,  342,  360,  363. 
Bank  of  Washington  v.  Reynolds,  377. 

V.  Triplett,  325,  333,  336. 
Banner  v.  Johnston,  43. 
Barbor  v.  Boehm,  264. 
Barbour  v.  Fullerton,  331. 
Barclay  v.  Bailey,  335. 

V.  Minchin,  26. 
Bardsley  v.  Delp,  297. 
Baring  v.  Clark,  152. 
Barker  v.  Bradley,  74. 

V.  Casidy,  172. 

V.  Hall,    365. 

V.  Mechanics'  Fire  Ins.   Co.,  215. 

V.  Parker,   79. 

V.  Sterne,  312. 
Barlow  v.  Bishop,  211. 
Barnes  v.  Vaughan,  339,  340,  345. 
Barnet  v.  Smith,  92. 
Barnett  v.  Offerman,  176. 
Barney  v.  Earle,  295. 

V.  Newcomb,  82. 

V.  Worthington,    100. 
Barrett  v.  Allen,  79,  333. 

V.  Evans,  305. 

V.  May,  110,   130. 

V.  Wills,  340,  376. 
Barrick  v.  Austin,  6. 
Barriere  v.  Nairac,  15. 
Barron  v.  Cady,  136. 
Barry  v.   Equitable  Assur.   Soc.   2.j4 

255. 
Barton  v.  Baker,  379. 
Bass  V.  Clive,  145. 
Bassenhorst  v.  Wilby,  200. 
Bassett  v.  Avery,  310. 
Batavian  Bank  v.  McDonald,  288. 
Bateman  v.  Joseph,  337. 
Bates  V.  Butler,  137. 
Bathe  v.  Taylor,  237. 
Batsford  v.  Eveiy,  270. 
Battle  V.  Weejns,  176,  204. 
Baxendale  v.  Bennett,  251.  312. 
Bay  V.  Coddington,  22,  296. 


Bayard  v.  Shunk.  264. 

Bayerque  v.  City  of  San  Francisco,  40. 

Bayley  v.  Taber,  70,  224. 

Beach  v.  Wise,  199. 

v.  Zimmerman,  290. 
Beale  v.  Parrish,  368. 
Beals  V.  See,  217,  221. 
Bearce  v.  Barstow,  226. 
Beard  v.  Root,  290. 
Beardesley  v.  Baldwin,  37. 
Beaumont  v.  Greathead,  281. 
Beck  V.  Thompson,  333. 
Beckwith,  In  re.  221. 
Bedell  v.  Carll,  199. 
Beecher  v.  Buckingham,  9. 
Beeching  v.  Gower,  339. 
Behrens  v.  McKenzie,  217,  221. 
Belcher  v.  Smith,  109,  130. 
Belden  v.  Lamb,  231,  232. 
Belford  v.  Bangs,  127. 
Bell  V.  Alexander,  392. 

V.  Bean,  299. 

V.  Dagg,  161,  162. 

V.  Hagerstown  Bank,  368, 

V.  Ingestre,  73. 

V.  Mahin,  235. 
Bellamy  v.  Majoribanks,  81. 
Bellasis  v.  Hester,  79. 
Belmont    Branch    of    State    Bank    v. 

Hoge,  303. 
Benedict  v.  Cowden,  121,  241. 

V.  Miner,  237. 
Benjamin  v.  Tillman,  76. 
Bennett  v.  Farnell,  65. 

V.  Smith,  232. 
Bennington  v.  Dinsmore,  62. 
Bennison  v.  Jewison,  224. 
Bentinck  v.  Dorrien,  90. 
Benton  v.  JIartin,  73,  74,  121. 
Berkley  v.  Cannon,  223. 
Berkshire  Bank  v.  Jones,  378. 
Berridge  v.  Fitzgerald,  368. 
Berry  v.  Southern  Bank,  374. 
Besancon  v.  Shirley,  50. 
Bickerdike  v.  Bollman,  372. 
Bickford  v.  First  Nat.  Bank,  391. 
Bierce  v.  Stocking,  183. 
Bigelow  V.  Colton,  199. 

V.  Stilphen,  242. 
Bilderback  v.  Burlingame,  77. 
Billgerry  v.  Branch,  374. 
Billings  v.  Collins,  192. 


410 


CASES    CITED. 


[TLe  figures  refer  to  pages.] 


Bird  V.  Daggett,  215. 
Birdsall  v.  Russell,  12,  304. 
Bissell  V.  Gowdy,  130. 

V.  Lewis,  99,  101. 
Bishop  V.  Hayward,  133. 

V.  Rowe,  23. 
Bitzer  v.  Wagar,  198. 
Black  V.  Caffe,  141. 

V.  Ridgway,  183,  266. 

V.  Ward,  50. 
Blackball  v.  Doren,  374. 
Blackie  v.  Pidding,  322. 
Blackstone  Bank  v.  HiM.  289. 
Blade  v.  Noland,  242. 
Blair  v.  Bank  of  Tennessee,  339,  347. 

V.  Wilson,  380,  384,  392. 
Blakemore  v.  Wood,  313. 
Blanchard  v.  Stevens,  295. 
Blanckenhagen  v.  Blundell.  63. 
Blatchford  v.  Melliken,  113. 
Blesard  v.  Hirst,  155,  325. 
Blethen  v.  Lovering,  1G7. 
Bliss  V.  Matteson,  273. 
Block  V.  Bell,  33,  61,  62. 
Blont  V.  Proctor,  277. 
Bloss  V.  Bloomer,  272. 
Blossom  V.  Griffin,  31,  74. 
Boalt  V.  Brown,  239. 
Boardman  v.  Spooner,  58. 
Bock  V.  Lauman,  231. 
Bodley  v.  Higgins,  72. 
Boehm  v.  Garcias.  84. 
Bogy  V.  Keil,  373. 
Bolton  V.  Dugdale,  56. 
Bonar  v.  Mitchell,  351. 
Bond  V.  Farnham,  379. 

V.  Fitzpatrick,  200. 
Bonner  v.  Nelson,  252. 
Bookstaver  v.  Jayne,  74,  121. 
Booth  V.  Powers,  234,  242. 

V.  Robinson,  213. 
Borden  v.  Clerk,  119. 
ribm  V.  First  Nat.  Bank,  399. 
Borough  V.  Perkins,  351. 
Bossange  v.  Ross^  231. 
Bottum  V.  Scott.  260,  312. 
Boulton  V.  Welsh,  357,  359. 
Bowen  v.  Newell,  333,  382,  385. 

V.  Stoddard,  169. 
Bower  v.  Hastings,  176,  204. 
Bowling  V.  Harrison,  366,  391,  392. 
Bowman  v.  McObesney,  46,  47. 


Bowyer  v.  Bampton,  164,  184,  224. 
Boyce  v.  Edwards,  99,  101. 

V.  Smith,  219. 
Boyd  V.  City  Sav.  Bank,  363,  366. 

V.  Cleveland,  378. 

V.  Corbitt,  188. 

V.  Emmerson,  401. 
Boynton  v.  Page,  270. 

V.  Pierce,  113,  131,  136,  140. 
Bradlaugh  v.  De  Rin,  112. 
Bradley  v.  Davis,  364. 

v.  Delaplaine,  382. 
Brady  v.  Chandler,  33. 
Braham  v.  Bubb,  37. 
Brailsford  v.  Williams,  360. 
Braithwaite  v.  Gardiner,  146,  311. 
Biaman  v.  Hess,  172. 
Brandt  v.  Mickle,  348. 
Bray  v.  Hadwen,  370. 
Brayley  v.  Kelly,  58. 
Breck  v.  Cole,  273,  313. 
Breckinridge  v.  Ralls,  50. 
Breitung  v.  Lindauer,  21. 
Brenzer  v.  Wightman,  370. 
Brewer  v.  Boynton,  132. 
Brewster  v.  McCardell,  75. 
Bridgeport  Bank  v.  Welch,  295. 
Bridger  v.  Pierson,  31. 
Bridges  v.  Berry,  349. 

V.  Winters,   235. 
Brigg  V.  Hilton,  265. 
Briggs  V.  Boyd,  179. 

V.  Dorr,  195. 

V.  Merrill,  307. 

V.  Partridge,  69. 
Brigham  v.  Gurney,  187. 

V.  Marean,  187. 
Bright  V.  Purrier,  326. 
Brill  V.  Turtle,  7,  41,  42. 
Brimhall  v.  Van  Campen,  271. 
Brind  v.  Hamp.shire,  135. 
Brindley  v.  Barr,  366. 
Bringham  v.  Lighley,  266. 
Bristol  V.  Warner,  6. 
Britton  v.  Dierker,  236. 

V.  Hall,  20;J. 
Bromage  v.  Lloyd,  72.  135. 
Bromley  v.  Frazier,  325. 
Bromwich  v.  Lloyd,  3. 
Brook  V.  Hook,  243. 

V.  Teague,  111.  312. 
Brookman  v.  Millbank,  317. 


CASES    CITED. 


411 


[The  figures  refer  to  pages.] 


Brooks  V.  Elkins,  32. 
V.  Hargreaves,  38. 
V.  Mitchell,  202. 
Brower  v.  Fisher,  219. 
Brown,  In  re  382,  385. 

V.  Butchers'  &  Drovers'  Bank,  58, 

108,  382. 
V.  Callaway,  299. 
V.  Crouise,  349. 
V.  Curtiss,  110. 
V.  Davies,  200,  285. 
V.  Donnell,  215. 
V.  Ferguson,  355,  370. 
V.  Harraden,    333. 
V.  Jodi-ell,  217. 
V.  Jones,  239,  341. 
V.  Leavitt,  293,  29T. 
V.  Leckie,  399. 
V.  Lusk,  382. 
V.  MafEey,  373. 
V.  Montgomery,  161. 
V.  Mott,  172,  175,  204. 
V.  Reed,  239. 
V.  Taber,  178. 
V.  Turner,  344. 
Browne  v.  Joddrell,  221. 
Browning  v.  Kinnear,  337. 
Bruce  V.  Burr,  103. 
V.  Wright.  121. 
Brush  V.  Scribner,  295,  297. 
Bruyn  v.  Russell,  260. 
Bryant  v.  Eastman,  193. 
V.  Faries,  128. 
V.  Merchants'  Bank,  377. 
V.  Pember,  266. 
Buchanan  v.  Hubbard,  209. 
Buckley  v.  Briggs,  214. 
V.  Hann,  1^. 
V.  Jackson,  305. 
Buckner  v.  Finley,  392. 
Bull  V.  Bank  of  Kasson,  382,  389,  391, 
393. 
V.  Rice,  227. 
V.  Sims,  142. 
Bullard  v.  Randall,  81,  384,  395. 
Buller  V.  Crips,  3,  137,  189. 
Burbridge  v.  Manners,  284,  314. 
Burchell  v.  Slocock.  5. 
Burchfield  v.  Moore,  238,  241. 
Burgess  v.  Merrill,  208. 
V.  Northern  Bank,  244. 
V.  Pollock,  219. 


Burke  v.  Allen,  220. 

V.  McKay,  26,  352,  392. 
Burkhalter  v.  Second  Nat.  Bank,  48. 
Burnap  v.  Cook,  113,  117. 
Burnham  v.  Webster,  378. 
Bumes  v.  Scott,  182. 
Burns  v.  Rowland,  298. 
Burpee  v.  Smoot,  136. 
Burr  V.  Smith,  281. 
Bm-rill  v.  Smith.  164. 
Burritt  v.  Tidmarsh,  348. 
Burrough  v.  Moss,  200. 
Burson  v.  Hxmtington,  70,  250. 
Burtnett  v.  Gwynne,  11. 
Burton  v.  Stewart,  264,  265. 
Bussard  v.  Levering,  79.  333,  367. 
Buxton  V.  Jones,  158,  338. 
B.  &  W.  Beeman  v.  Duck,  315. 


c 


Cabot  Bank  v.  Warner,  366. 
Caister  v.  Eccles,  9. 
Calder  v.  Billington,  196. 
Callanan  v.  Edwards,  190. 
Callott  V.  Haigh,  289. 
Callow  V.  Lawrence,  282,  285. 
Camden  v.  McKoy,  113,  140. 
Camden  Bank  v.  Hall,  235. 
Came  v.  Brigham,  214. 
Cameron  v.  Chappell,  233. 
Camidge  v.  Allenby,  162,  264,  347. 
Cammer  v.  Han-ison,  328. 
Campbell  v.  French,  79,  328. 
v.  Pettengill,  86. 
V.  Sloan,  229. 
V.  Weister,  50. 
Canadian     Bank     of     Commerce     T. 

Coumbe,  146. 
Canajoharie  Nat.  Bank  v.  Diefendorf, 

303,  319. 
Canal  Bank  v.  Bank  of  Albany,  145," 

245,  315. 
Cannan  v.  Bryce,  277. 
Canon  v.  Grigsby,  235. 
Capp  v.  LaiKaster,  327. 
('apron  v.  Capron,  39. 
Garden  v.  McNiel,  163. 
Cardwell  v.  Hicks,  299. 

V.  Martin,  231. 
Carew  v.  Duckworth,  374 


412 


CASES    CITED, 


[TLie  figures  refer  to  pages.] 


Carll  V.  Brown,  331. 
Carlon  v.  Keuealy,  48. 
Carlos  V.  Faucourt,  40. 
Carnegie  v.  Morrison,  98. 
Carnwright  v.  Gray,  G,  77,  2G0. 
Carolina  Nat.   Bank  v.  Wallace,  364, 

3GG. 
Carpenter  v.  Greenop,  200. 
Carrick  v.  Vickery,  l'J4. 
Carrier  v.  Cameron,  318. 
Carrollton  Bank  v.  Tayleur,  99. 
Carrutliers  v.  West,  17G. 
Carson  v.  Peacock,  99. 
Carter  v.  Beckwith,  218. 

V.  Bradley,  357. 

V.  Burley.  351,  370,  371. 

V.  Downish,  2. 

V.  Flower,  373. 

V.  Union  Bank,  351. 
Cartwrigbt  v.  Williams,  135. 
Carver  v.  Hayes,  77. 
Gary  v.  Bancroft,  13. 

V.  White,  290. 
Casborne  v.  Button,  32. 
Case  V.  Hall,  23. 

V.  Henderson,  395. 

V.  Mechanics'  Banking  Ass'n,  317. 
Cash  V.  Keunion,  53. 
Cashman  v.  Harrison,  154,  327. 
Cassel  V.  Dows,  98. 
Castrique  v.  Buttigieg,  153. 
Catlin  V.  Gunter,  70. 
Caulkins  v.  Fry,  223. 

V.  Whisler,  243,  253. 
Gaunt  V.  Thompson,  355,  372. 
Cayuga  Co.  Bank  v.  Hunt.  334. 

V.  Warden,  127,  357,  358,  363. 
Cazet  V.  Field,  224,  270,  272. 
Central  Bank  v.  Allen,  340,  376. 

V.  Davis,  113,  377. 
Central   Bank   of   Brooklyn   v.   Ham- 
met  t,  303,  307. 
Challiss  V.  McCnim,  119,  1G6. 
Chahnors  v.  Lanion,  203,  309. 
Chamberlyn  v.  Delarive,  346. 
Chambers  v.  Union  Bank,  116. 
Champion  v.  Gordon,  382. 
Chandler  v.  Temple,  71. 
Chanoine  v.  Fowler,  3G0. 
Chapin  v.  Dobson,  74. 
Chapman  v.  Black,  232. 

V.  Cottrell,  G9. 


Chapman  v.  Keane,  3G1,  3G2. 

v.  Hose,  254. 

V.  White,  81,  395. 
Chappel  V.  Brock  way,  275. 
Chappell  V.  Bissoll,  71,  134. 

V.  Spencer,  240. 
Charles  v.  ilarsden,  146,  175,  176,  204. 
Chase  v.  Hathorn,  1G4. 
Chaters  v.  Bell,  350. 
Cheek  v.  Roper,  340,  344. 
Chemical  Electric  Light  &  Power  Co. 

V.  Howard,  182. 
Cheflault  v.  Bush,  264. 
Chester  v.  Dorr,  176,  204. 
Chick  V.  Pillsbury.  370. 
Chicopee  Bank  v.  Philadelphia  Bank. 

338. 
Childs  V.  Monins,  G8. 
Chillicothe  Branch  of   State  Bank  v. 

Fox,  347. 
Chipman  v.  Tucker,  70. 
Cholmeley  v.  Darley,  121,  241. 
Chouteau  v.  Webster,  367. 
Chi-ysler  v.  Renois,  52,  297. 
Church  V.  Barlow,  174. 

V.  Clapp,  202. 

V.  Howard,  240. 
Citizens'  Nat.  Bank  v.  Cade,  367. 

V.  Pioilet,   35,  38. 

V.  Richmond,  238. 
Citizens'  Nat.  Bank  of  Davenport  v. 

Importers'  &  Traders'   Bank,  244. 
City  Bank  v.  Barnard,  270. 

V.  Cutter,  79. 
City  of  Aurora  v.  West,  224. 
City  of  Lexington  v.  Butler,  199. 
Claflin  V.  Boorum,  178,  232. 

V.  Lenheim,  304. 
Clark  V.  Blackstock,  240. 

V.  Callison,  196. 

V.  King,  10,  49. 

V.  Muadal,  21. 

V.  Pease,  183,  255,  318. 

V.  Phillips,  187. 

V.  Si-sson,  178. 

V.  Whitaker,  196,  197. 
Clarke  v.  Dunham,  218. 

V.  Johnsou,  251,  313. 

V.  Percival,  41,  55. 

V.  School  Dist..  214. 
Clason  V.  Bailey,  .59. 

V.  MoiTis,  287,  288. 


CASL'S    CITED. 


413 


[The  Ogures  refer  to  pages.] 


Clayton  v.  Gosliug,  76. 
Clerk  V.  Martin,  4. 
Cleveland  &  M.  R.  Co.  v.  Himrod  Fur- 
nace Co.,  213. 
Clift  V.  Rodger,  31G. 
Cline  V.  Guthrie,  70,  254. 
Clinton  Nat.  Bank  v.  Graves,  272. 
Cloflin  V.  Boorum,  228. 
Clough  V.  Davis,  271. 
Clute  V.  Small,  242. 
Cobb  V,  Doyle,  295. 
Cochran  v.  Nebeker,  234. 
Cock  V.   Fellows,  131,   193. 
Cockle  V.   Flack,  228. 
Coddington  v.  Davis,  378. 
Coffin  V.  Loring,  78. 
Coggill  V.  American  Exch.  Bank,  1G4 

244,  315. 
Cohea  v.  Hunt,  334. 
Cohen  v.  Hale,  404. 
Cole  V.  Cushiug,  113. 
V.  Sackett,  20. 
V.  Saulpaugh,  177,  17a 
Colehan  v.  Cooke,  39. 
Coleman  v.  Biedman,  186. 

V.  Sayer,  331. 
Collier  v.  Nevill,  172. 
Collins  V.  Bradbury,  43. 
V.  Butler,  337. 
V.  Denning,  327. 
V.  Gilbert,  12,  318. 
V.  Lincoln,  50. 
V.  Locke,  276. 
V.  Martin,  314. 
CJollott  V.  Haigh,  155. 
(Jolms  V.  Bank,  333. 
Colorado  Nat  Bank  v.  Boettcher,  395. 
Colson  V.  Arnot,  115,  243. 
Colt  V.  Barnard,  201,  325. 
Commercial  Bank  v.  Hamer,  334. 

V.  Varnum,  26,  351,  3.-)2. 
Commercial  Bank  of  Buffalo  v.  War- 
ren, 235. 
Commercial  &  Farmers'  Nat.  Bank  v. 

First  Nat.  Bank,  397. 
Commissioners  of  Marion  Co.  v.  Clark, 

310. 
Commonwealth  v.  Butterick,  31,  108. 
v.  Dallinger,  63 
T.  Ray,  382. 
Comstock  V.  Hannah,  304. 
V.  Hier,  296. 


Condit  V.  Baldwin,  226. 
Condon  v.  Pearce,  1U4. 
Conkling  v.  Gandall,  316. 

V.  Vail,  295. 
Connor  v.  Martin,  211. 
Conover  v.  Earl,  129. 
Conrad  v.  Kinzie,  271. 
Continental    Nat.    Bank  r.   M.    Corn- 
hauser  &  Co.,  398. 

V.  Townsend,  298. 
Cook  V.  Darling,  333. 

V.  Litchfield,  356. 

V.  Norwood,  184. 

V.  Satterlee,  54. 

V.  Wright,  258. 
Cooke  V.  State  Nat.  Bank,  397. 
Coolidge  V.  Payson,  97. 

V.  Ruggles,  10,  38. 
Cooper  V.  Meyer,  145,  315. 
Corbett  v.  Clark,  43. 

V.  State,  38. 
Corcoran  v.  Powers,  231. 

V.  White,  82. 
Coi'dier  v.  Thompson,  71. 
Corney  v.  Da  Costa,  372. 
Coming  v.  Pond,  232. 
Cory  V.  Scott,  327. 
Costelo  V.  Crowell,  38. 
Cota  V.  Buck,  40. 
Cotes  V.  Davis,  194. 
Couch  V.  Meeker,  74. 

V.  Waring,  287. 
Coulter  V.  Richmond,  139. 
Cour§in  v.  Ledlie,  43. 
Coward  v.  Hughes,  258. 
Cowie  V.  Halsall,  238. 

V.  Stirling,  63. 
Cowing  V.  Altman,  70,  74. 
Cowles  V.  Harts,  359. 
V.  McVickar,  172. 
Cox  V.  Boone,  391. 
V.  Coleman,  94. 
V.  National  Bank,  82,  339. 
V.  Troy,  70,  90,  95. 
Coy  V.  Stiner,  58. 
Coye  V.  Palmer,  232. 
Craft  V.  Fleming,  118. 
Cram  v.  Hendricks,  170.  172,  228,  232. 
Crandall  v.  Schroeppel,  323. 

V.  Vickery,  309. 
Crane  v.  Price,  232. 
Cranson  v.  Goss,  271,  272. 


414 


CASES    CITED. 


[The  figures  refer  to  pages.] 


Crawford  v.  West  Side  Bank,  236,  381. 
Craytborue  v.  Swiuburue,  288.    . 
Creveliug  v.  Bloomsbury  Nat.   Bank, 

395. 
Cribbs  V.  Adams,  47. 
Crim  V.  Starkweather,  47,  328. 
Crippen  v.  Culver,  218. 
Cromwell  v.  Arrott,  328. 

V.  Hewitt,  8,  13,  140. 
Cronise  v.  Kellogg,  175. 
Crook  V.  Jadis,  302,  334. 
Crosby  v.  Grant,  304. 

V.  Roub,  189. 
Croskey  v.  Skinner,  131. 
Crosman  v.  Feller,  74. 
Crosse  v.  Smith,  354, 
Crossley  v.  Horn,  200. 
Crossmore  v.  Page,  47. 
Crouch  V.  Credit  Fonder  of  England, 

15,  190. 
Cruchley  v.  Clarance,  03. 
Culver  V.  Bigelow,  229. 

V.  Robinson,  52. 
Cumber  v.  Wane,  23. 
Cummings  v.  Boyd,  183. 

V.  Thompson,  319. 

V.  Williams,  227. 
Cundy  v.  INIarriott,  338. 
Currie  v.  Misa,  25G,  295. 
Cui-rier  v.  Lockwood,  32,  34. 
Curtis  V.  Letivitt,  213. 

V.  State  Bank,  3G6, 
Cushing  V.  Gore,  383. 
Cushman  v.  Dement,  131. 

V.  Haynes,  55. 
Cutler  V.  Welch,  277. 
Cutting  V.  Conklin,  113. 
Cuyler  v.  Stevens,  127,  354,  3G3. 


D 


Daggett  V.  Daggett,  15. 

V.  Whiting,  178. 
Dale  V.  Gear,  113. 

Dalrymple  v.  Hillenbrand,  164,  315. 
Dana  v.  Boston  Third  Nat.  Bank,  395. 

v.  Sawyer,  335. 
Dane  v.  Kirkwall,  221, 
Dann  v.  Norris,  134. 
Darbishire  v.  Parker,  369. 
Darnell  v,  Williams,  2G6. 


Darrow  v.  Walker,  259. 
Darwin  v,  Rippey,  240. 
Davidson  v.  Cooper,  234. 
Davis  V,  Clarke,  G2,  88. 

V,  French,  G8. 

V,  Garr,  G4. 

V.  Gowen,  3GG. 

V.  Graham,  289. 

V.  Jones,  74. 

V.  McCready,  267. 

V.  Miller,  204. 

V,  Randall,  174. 
Davis  Sewing  Mach.  Co.  v.  Best,  251. 
Davren  v.  White,  220. 
Dawkes  v.  Lord  De  Lorane^  40,  41, 
Dawson  V.  Goodyear,  177. 

V.  Prince,   3(>4, 
Day  V.  Lyon,  113. 

V.  Pool,  2G5. 

V.  Saunders,  297, 
Dayton  v.  Moore,  223. 

V.  Trull,  34G. 
Dean  v.  Car  ruth,  6,  77. 

V.  Hall,  112,  137. 
Deberry  v,  Darnell,  52, 
De  Forest  v,  Frai-y,  38, 

V.  Strong,  228. 
De   La  Chaumette  v.   Bank  of  Eng- 
land, 198. 
Delano  v.  Bartlett,  2G0. 
De  Lavallette  v.  Wendt,  31, 
Delaware  Bank  v.  Jai-vis,  171, 
Delaware,  L.  &  W.  R.  Co,  v.  Gilbert, 

67. 
Demond  v,  Burnham,  75. 
De  Mott  V.  Starkey,  309. 
Den  V.  Clark,  218. 

V.  Wright,  235. 
Dennett  v.  Goodwin,  45. 
Dennie  v.  Walker,  340,  37a 
Dennis  v.  Morrice,  373. 

V.  Piper,  22. 
Denniston  v.  Bacon,  178. 
Dennistoun  v,  Stewart,  350,  351,  391 
Denton  v.  Peters,  74. 
De  Pauw  v.  Bank  of  Salem,  107. 
Desha  v.  Stewart,  81. 
Desilver's  Estate,  In  re,  216. 
Detrick  v.  McGlone,  2GG. 
Deuters  v.  Townsend,  200. 
De  Wald's  Estate.  37. 
Dewey  v.  Reed,  239. 


CASES   CITED. 


415 


[The  figures  refer  to  pages.] 


De  Witt  V.  Walton,  69. 
De  Wolf  V.  Johnsou,  230. 

V.  Murray,  158,  358. 
Dexter  v.  Hall,  21U. 
Diamond  Match  Co.  v.  Roeber,  27G. 
Dick  V.  Leverich,  245. 
Dickens  v.  Beal.  2G.  352,  373.  384. 
Dickinson  v.  Hall.  2U5. 
District  of  Columbia  v.  Cornell,  284. 
Dix  V,  Van  Wyck,  230. 
Dixon  V.  Dixon,  295,  297. 

V.  Nuttall,  47,  328. 
Dobree  v.  Eastwood,  363,  366,  371. 
Dod  V.  Edwards,  311. 
Dodge  V.  Bank  of  Kentucky,  370. 

V,  National  Exch.  Bank,  402. 
Dole  V.  Gold,  357,  359. 
Donnelly  v.  Howie,  374. 
Doremus  v.  Bond,  266. 
Dorsey  v.  Wolff,  38. 
Doubleday  v.  Kress,  131,  283,  343. 
Dougal  V.  Cowles,  23. 
Dougherty  v.  Deeney,  281. 
Douglass  V.  Matting,  251,  254. 

V.  Wilkeson,  59,  129. 
Downing  v.  Backenstoes,  1. 
Downs  V.  Collins,  G7. 
Dows  V.  Kidder,  309, 
Drake  v.  Rogers,  75,  271. 
Draper  v.  Clemens,  323,  340,  345. 
Drayton  v.  Dale,  311. 
Dresser  v.  Missouri  &  I.   Ry.  Const. 

Co.,  Ill,  309. 
DiTim  V.  Drum,  235. 
Drummond  v.  Dinimmond,  62. 
Dry  Dock  Bank  v.  American  Life  In- 
surance &  Trust  Co.,  227. 
Dubois  V.  Mason,  109. 
Dubose  V.  Wbeddon,  210. 
Dudman  v.  Earl,  117. 
Duel  V.  Spence,  179. 
Dufaur  v.  Oxenden,  92. 
Duffield.v.  Johnston,  32. 
Dull  V.  Bricker,  S3,  101. 
Dumont  v.  Williamson,  119,  167. 
Dunavan  v.  Flynn.  90,  91,  95,  96. 
Duncan  v.  Berlin,  81. 

V.  Gilbert,  179,  299. 

V.  McCullough,  340,  348. 

V.  Maryland  Sav.  Inst.,  226. 

V.  MoiTison,  184. 

V.  Scott,  255,  317,  318. 


Dunham  v.  Dey.  227. 
Dunkle  v.  Nichols,  47. 
Dunlop  V.  Gregory,  275. 

V.  Silver,  3. 
Dunn  V.  O'Keefe,  325. 

V.  Weston,  178,  179,  204. 
Dunnent  v.  Tuttle,  266. 
Dunning  v.  Heller,  106. 
Durant  v.  Bauta,  171. 
Durgin  v.  Bartol,  16. 

V.  Ireland,  11. 
Durham  v.  Manrow,  134. 
Durkin  v.  Cranston,  27. 
Dutchess  Co.  Mut.  Ins.  Co.  y.  Hach- 

field,  306. 
Dykers    v.    Leather    Manufacturers' 
Bank,  383. 


E. 


Eadie  v.  Slimmon,  254. 

Eads  V.  City  of  Carondelet,  82. 

Eagle  Bank  v.  Chapin,  370. 

V.  Hathaway,  366. 
Eaglechilde's  Case,  2. 
Eames  v.  Crosier,  202. 
Earl  V.  Peck,  73,  263. 
Earle  v.  Reed,  210. 
East  V.  Smith,  301. 
Easter  v.  Minard,  224. 
Easterly  v.  Barber,  132. 
Eastman  v.  Plumer,  281. 

V.  Shaw,  70,  74. 
Easton  v.  Pratchett,  182. 
East  River  Bank  v.  Butterworth,  23. 
Eastwood  V.  Kenyon,  258. 
Eaton  V.  Alger,  188,  228. 

V.  Aspinwall,  216. 
Eberhart  v.  Page,  140. 
Eckhert  v.  Ellis,  205. 
Ecton  V.  Halan,  12. 
Edgar  v.  Boies,  52. 

V.  Chut,  3. 
Edge  V.  Bumford,  195. 
Edgerly  v.  Shaw,  209. 
p]dgerton  v.  Edgerton,  6. 
Edie  V.  East  India  Co.,  115,  123,  125, 

126,  193. 
Edis  V.  Bury,  31,  62. 
Edmonds  v.  Gates,  358, 
Edmunds  v.  Groves,  183. 
Edson  V.  Fuller,  101. 


416 


CASES    CITKU. 


[The  figures  refer  to  pages.] 


Edwards  v.  Dick,  1(>4. 
Ehrichs  v.  De  Mill,  7,  41,  42. 
Elford  V.  Teed,  334. 
Eliasou  V.  Henshaw,  82, 
Elliott  V.  Ince,  217,  221. 
V.  Miller,  101. 
V.  Wood,  230. 
Ellis  V.  Brown,  131. 

V.  Mason,  33. 
Ellison  V.  Collingridge,  30,  31,  50. 

V.  Jackson  Water  Co.,  83. 
Ellsworth  V.  Brewer,  113. 
Elting  V.  Brincherhoff,  324. 
Emerson  v.  Curtts,  114. 
Emly  V.  Lye,  22,  199. 
Emmett  v.  Tottenham,  188. 
Epler  V.  Funk,  305. 
Ernst  V.  Ci"Osby,  277. 
V.  Steckman,  40. 
Erwin  v.  Adams,  340,  376. 
V.  Downs,  164. 
V.  Lynn,  113. 
Espy  V.  Bank  of  Cincinnati,  116,  397, 

401. 
Essex  Co.  Nat.  Bank  v.  Bank  of  Mon- 
treal, 399. 
Estabrook  v.  Smith,  194. 
Esty  V.  Snyder,  114. 
Etheridfre  v.  Gallagher,  182,  202. 

V.  Ladd,  323. 
Evans  v.  Cramlington,  124. 
V.  Foreman,  234. 
V.  Gee,  106,  326. 
V.  Kymer,  178,  296. 
V.  Williamson,  2G5. 
Everard  v.  Wilson,  358. 
Everson  v.  Carpenter,  209. 
Evertson  v.   National   Bank  of   New- 
port, 12,  15,  59. 
Ewin  V.  Lancaster,  286. 
Exchange  Bank  of  St.  Louis  v.  Rice, 

93,  99. 
Exeter  Bank  v.  Gordon,  326. 


F 


Faikney  v.  Reynons.  278. 
Fairchild  v.  Ogdensburgh  R.  Co.,  62, 
142. 
V.  Railroad  Co.,  45. 
Fairland  v.  Percy,  67. 


Fairley  v.  Rcch,  151. 

Fall  River  Union  Bank  v.  Willard,  4d 

Farmers'  Bank  v.  Duvall,  339,  370. 

V.  Gunuell,  375. 

V.  Noxon,  178. 
Farmei-s'  Bank  of  Kentucky  v.  Ewing, 

377. 
Farmers'  &  Citizens'  Bank  T.  Noxon, 

249,  309,  319. 
Farmers'  &  M.  Bank  v.  Battle,  365. 

V.  Butchers'  &  Drovers'  Bank,  215, 
397. 
Farmers'   &    Merchants'    Ins.    Co.    r. 
Needles,  215. 

V.  Joslyn,  230. 

V.  Rathbone,  285. 
Farnam  v.  Brooks,  220. 
Farnsworth  v.  Allen,  335. 

V.  Drake,  66. 
Farnum  v.  Brooks,  219. 

V.  Fowle,  79. 
Farrington  v.  Frankford  Bank,  298. 
Farwell  v.  Curtis,  391. 
Fassin  v.  Hubbard,  109,  119. 
Faulder  v.  Silk,  218. 
Favor  v.  Philbrick,  278. 
Fawsett  v.  National  Life  Ins.  Co.,  16. 
Fay  V.  Guynon,  9. 

v.  Smith.  239. 
Fearing  v.  Clark,  313. 
Federick  v.  Winans,  134. 
Fenn  v.  Harrison,  108,  161,  162,  190. 
Fentum  v.  Pocock,  289. 
Ferguson  v.  Davis,  Su. 
Fernandez  v.  Lewis,  331. 
Ferner  v.  Williams,  329,  341. 
Fernon  v.  Farmer,  15. 
Ferris  v.  Bond,  59. 

V.  Brush,  254. 
Fetters  v.  Muncie  Nat  Bank,  177. 
Field  V.  Munson,  31. 

V.  Nickerson,  47,   330. 
Fielden  v.  Lahens,  307. 
First  Nat.  Bank  v.  Carson,  38,  54. 

V.  Gish,  395. 

V.  Grant,  176. 

V.  Green,  249,  255,  318,  319. 

V.  Grindstaff.  224. 

V.  Harris,  393. 

V.  Loach,  398-400. 

V.  McMichael,  401. 

V.  Needham,  393. 


CASES    CITED. 


417 


[The  figures  refer  to  pagi?s.] 


First  Nat.  Bank  v.  Price,  47,  328. 

y.  Ryerson,  354. 

V.  Slieen.  40. 

V.  Whitman,  395,  399,  402. 
Firth  V.  Broolvs,  391. 

V.  Thrush,  3G0. 
Fish  V.   First  Nat   Banlc  of  Detroit, 
164. 

V.  French,  200. 
Fisher  v.  Becliwith,  323. 

V.  Fisher,  295. 

V.  Leland,  202,  301. 

V.  Leslie.  34. 

V.  Pomfret,  63. 

V.  Samuda,  264. 

V.  Sharpe,  265. 
Fitch  V.  McDowell.  175. 
Fitchburg  Bank  v.  Greenwood,  118. 

V.  Perley,  371. 
Fitchburg  Ins.  Co.  v.  Davis,  360. 
Fitzhugh  V.  Wilcox,  218. 
Fletcher  v.  Chase,  265. 

V.  Pierson,  392. 

V.  Thompson,  54. 
Fleury  v.  Tufts,  36. 
Flint  V.   Flint,  129. 

V.  Rogers,  334. 
Florence  Min.  Co.  v.  Brown,  397. 
Fobes  V.  Cantfield,  229. 
Foden  v.  Sharp,  81.  339. 
Fogarties  v.  State  Bank,  394. 
Fclger  V.  Chase,  108. 
Follett  V.  Moors,  54. 
Folsom  V.  Bartlett,  202. 
Foote  V.  Emerson,  227. 
Forbes  v.  Espy,  06. 

V.  Omaha  Nat.  Bank,  365. 
Ford  V.  Angelrodt,  84. 
Forman  v.  Wright,  267. 
Forward  v.  Thompson,  34. 
Foss  V.  Nutting,  187. 
Foster  v.  Julien,  375,  376. 

V.  Mackinnon,  253. 

V.  Shattuck,  65. 
Fourth  Nat.  Bank  of  Chicago  v.  City 

Nat.  Bank  of  Grand  Rapids,  394. 
Fowler  v.  Brantly,  305. 

V.  Strickland,  174. 
Fraker  v.  Little,  244. 
Fralick  v.  Norton,  38. 
Francia  v.  Joseph,  295. 
Frank  v.  Lanier,  101,  244. 

NEG.  BILLS 27 


Franklin  v.  March,  33,  77. 

V.  Twogood,  7. 
Franklin  Bank  v.  Freeman,  383. 

V.  Raymond,  343. 
Frazer  v.  D'Invilliers,  119. 
Frazier  v.   Trow's   Printing   &   Book- 
binding Co.,  74. 
Freeman  v.  Boyuton,  323.  337,  342. 

V.  Clute,  170. 

V.  Ellison,  70. 

V.  Perry,  131. 
Freeman's  Bank  v.  Perkins,  370. 

V.  Rollins,  290. 

V.  Ruckman,  134. 
Freiberg  v.  Cody,  391. 
French  v.  Bank  of  Columbia,  373. 

V.  Grindle,  232. 

V.  Jarvis,  187,  284. 

V.  Turner,  108. 
Freimd  v.  Importers'  &  Traders'  Nat. 

Bank,  132,  195,  399. 
Friedlander  v.  Texas  &  P.  Ry.  Co.,  16. 
Friend  v.  Wilkinson,  367. 
Fi'ost  V.  Inhabitants  of  Belmont,  274. 
Fry  V.  Fry,  254. 

V.  Hill,  329,  330. 

V.  Reusseau,  50. 
Fugure  v.  Mutual  Soc.  of  St  Joseph,. 

83. 
Fuller  V.  Dame,  274. 

V.  McDonald.  377. 
Fuller  ton  v.  Bank  of  U.  S.,  323,  370. 

V.  Hill,  109. 
Furman  v.  Haskin,  47.  328. 
Furze  v.  Sharwood,  359.  360. 
Fydell  v.  Clark,  199. 


G 

Gage  V.  Kendall,  185. 
Galbraith  v.  Fullerton,  289. 
Gale  V.  Kemper,  338. 

V.  Miller,  70,  90. 

V.  Walsh,  155,  349. 
Gallagher  v.  Roberts,  22. 
Gallery  v.  Prindle,  40. 
Gamble  v.  Grimes,  266. 
Gammon  v.  SchmoU,  86. 
Gantt  V.  Mackenzie,  157. 
Gardner  v.  Gager,  22. 

V.  Gardner,  254. 


416 


CASES    CITED. 


[The  figures  refer  to  paj,'os.] 


Gardner  v.  Maxey,  274. 

V.  Mayuard,  IISI. 

V.  Walsh,  240. 

V.  Watson,  289. 
Garland,  Ex  parte,  G7. 
Garnett  v.  McKewan,  404. 

V.  Woodcock,  334,  3G9. 
Garrard  v.  Iladdan,  251. 
Garvin  v.  Wiswell,  12. 
Gates  V.  Beeclier,  339. 

V.  Parker,  99. 
Gayoso  Sav.  Inst.  v.  Fellows,  189. 
Gazzani  v.  Armstrong,  152. 
Geary  v.  Physic,  58,  108. 
Geib  V.  Reynolds,  20. 
Geill  V.  Jeremy,  370. 
Genesee  Bank  v.  Patchln  Bank,  215. 
George  v.  Surrey,  58. 
Georgia  Nat.  Bank  v.  Henderson,  382. 
German  v.  Ritchie,  109. 
Germania  Bank  v.  Distler,  75,  313. 
Gibb  V.  Mather,  341. 
Gibbs  V.  Cannon,  376. 

V.  Linabury,  254. 
Gibson  v.  Cooke,  395. 

V.  Minet,  16,  36,  59. 

V.  Renne,  20. 

V.  Smith,  84. 

V.  Tobey,  22. 
Gilbert  v.  Dennis,  354,  358,  359,  363. 

V.  Nantucket  Bank,  137. 

V.  Shai-p,  197. 
GUI  V.  Cubitt.  302. 

V.  Palmer,  355. 
Gillespie  v.  Hannahan,  340. 
Gillett  V.  Averill,  338. 
GiUilan  v.  Myers,  38. 
Gilson  V.  Stevens  Manuf' g  Co.,  184. 
Girard   Bank  v.   Bank  of  Penn   Tp., 

398. 
Gist  V.  Lybrand,  365,  366,  376. 
Gladwell  v.  Turner,  369. 
Glasgow  V.  Pratte,  363. 
Glenn  v.  Fanners'  Bank,  224. 
Glicksman  v.  Earley,  355. 
Gloucester  Bank  v.  AVorcester,  290. 
Goddard  v.  Merchants'  Bank,  145, 152, 

244,  315. 
Goggerly  v.  Cuthbert,  296. 
Goodall  V.  Dolly,  325. 
Goodell  V.  HaiTington,  221. 
Gooding  v.  Morgan,  20. 


Gooding  v.  Underwood.  86. 
(ioodloe  V.  Taylor,  40. 
Goodman  v,  Eastman.  238. 

V.  Harvey,  302,  303. 

V.  Simonds,  303,  304. 
Goodrich  v.  Gordon,  98. 

V.  Reynolds,  213. 
Goodsell  V.  Myers,  209. 
Goodwin  v.  Conklin,  297. 

v.  Goodwin,  38. 

V,  Robarts,  2,  14,  16. 
Goodyear  v.  Watson,  287,  288. 
Goi'dou  V.  Price,  21. 

V.  Wansey,  281, 
Gore  V.  Gibson,  222. 
Gorliam  v.  Keyes.  274. 
Gorman  v.  Ketchum,  307. 
Goshen  Nat  Bank  v.   Bingham,  134. 

196. 
Goshen  &  M.  Turnpike  Road  v.  Hur- 

tin,  48. 
Gould  V.  Armstrong,  270. 

V.  Mortimer,  112. 

V.  Segee,  251. 
Goupy  V.  Harden,  346. 
Gower  v.  Moore,  345,  377, 
Gracie  v.  Sandford,  347. 
Grafton  Bank  v.  Cox,  340. 
Graham  v.  Johnson,  190. 

V.  Maguire,  164. 

v.  Negus,  21. 

V.  Sangston,  358. 
Grandin  v.  Le  Roy,  178. 
Grant  V.  Da  Costa,  76. 

V.  Ellicott,  146,  175,  204. 

V.  Healey,  53,  169. 

V.  Hunt,  99. 

V.  Shaw,  S3. 

V.  Vaughan,  3,  110,  111,  198.  199. 

V.  Wood,  38. 
Graves  v.  American  Exch.  Bank,  116, 

243,  244. 
Gray  v.  Bank  of  Kentucky,  178,  317. 

V.  Bowden.  32,  62. 

V.  Hook.  273. 

v.  Johnston,  403,  404. 

V.  Milner,  61,  62,  88. 

V.  Wood,  74,  186. 

V.  Worden,  51. 
Groathead  v.  Walton,  272. 
Greele  v.  Parker,  97. 
Green  v.  Cummins,  349, 


CASES    CITED. 


419 


[The  figures  refer  to  pages.] 


Green  v.  Eldred,  31. 

V.  Goiugs,  ol4. 

V.  Skeel,  («,  G9. 

V.  Swink,  18G. 
Greenawalt  v.  McDowell,  200. 
Greenfield  Bank  v.  Crafts,  235. 
Greenfield  Sav.  Bank  v.  Stowell,  231. 
Greening  v.  Patten,  281. 
Greenwell  v,  Playdon,  202. 
Grensel  v.  Hubbard,  132. 
Grey.  V.  Cooper,  184. 
Gridley  v.  Bane,  249. 

V.  Capen,  109. 
Griener  v.  Ulerey,  215. 
Grierson  v.  Mason,  74. 
Griffin  v.  Goff,  78. 

V.  Weatherby,  40,  43. 
Griffith  V.  Reed,  174. 

V.  Wells,  22.5. 
Grimes  v.  Hillenbrand,  224,  270. 

V.  Piersol,  180. 
Grimshaw  v.  Bender,  2G. 
Grinman  v.  Walker,  364,  3G6. 
Grinnell  v.  Baxter,  15. 
Griswold  v.  Davis,  71. 
Grocei-s'  Bank  v.  Penfield,  249,  298. 
Gi'osvenor  v.  Stone,  373. 
Groth  V.  Gyger,  345. 
Grugeon  v.  Smith,  3.j8. 
Grutacap  v.  Woullnise,  56. 
Guernsey  v.  Burns,  187. 

V.  Rexford,  229. 
Guion  V.  Doherty,  21, 
Gulick  V.  Ward,  273. 
Gunnis  v.  Weigey,  287. 
Gurney  v.  Womersley,  161. 
Gushee  v.  Eddy,  49. 
Gwinnell  v.  Herbert,  127,  140. 


H 


Haine's  Adm'rs  v.  Tarrant,  210. 

Halifax  v.  Lyle,  146,  312. 

Hall  V.  Auburn  Turnpike  Co.,  215. 

V.  Conder,  162. 

V.  Earnest,  231. 

V.  Farmer,  1. 

V.  Fuller,  238. 

V.  Haggart,  227. 

V.  Newcomb,  139. 


Hall  V.  Steel,  95. 
V.  Stevens,  22. 

V.  Toby,  47,  109. 
V.  Wilson,  231,  250. 
Halhday  v.  McDougall,  20,  351. 
Halloran  v.  Whitcomb,  9. 
Haly  V.  Lane,  164. 
Hamer  v.  Sidway,  263. 
Hamilton  v.  Le  Grange,  229. 

V.  Newcastle  &  D.  R.  R.,  214. 

V.  Spottiswoode,  30. 
Hammett  v.  Barnard,  266. 
Hammond  v.  Dirfrene,  37-1. 
Hanauer  v.  Doane,  278. 
Hance  v.  Miller.  113. 
Hankey  v.  Trotman,  331. 
Hannahs  v.  Sheldon,  220. 
Hanuum  v.  Richardson,  119,  164,  167, 
Hansard  v.  Robinson,  322. 
Hansberger  v.  Geiger,  289. 
Harbert  v.  Dumont,  289. 
Hardy  v.  Merriweather,  214. 

V,  Waters,  131. 
Hare  v,  Henty,  391. 
Harger  v,  Worrall,  146,  317,  319. 
Harker  v.  Anderson,  382,  392. 
Harp  V.  Kenner,  377. 
Harpendiug  v.  Gray,  284. 
Harrell  v.  Broxton,  202. 
Harrington  v.  Lee.  265. 
Harris  v.  Berger,  251. 

V.  Brisco,  274. 

V.  Packer,  338. 
Harrison  v.  McClelland,  68. 

V.  Ruscoe,  356.  361,  3G2. 
Harrod  v.  Myers,  209. 
Harrop  v.  Fisher,  117,  132,  195. 
Hart  v.  Smith,  47,  328. 
Hartford  Bank  v.  Barry,  79,  344. 

V.  Stedman,  344,  364,  366,  370. 
Hartley  v.  Case,  359. 

v.  Wilkinson,  37,  121,  241. 
Hartwell  v.  McBeth,  186. 
Harvey  v.  Cane,  60,  83. 

V.  Martin^  96. 

V.  Smith,  313. 

V.  Towers.  2G9,  318. 
Harwood  v.  Jones,  13. 
Hasbrook  v.  Palmer,  50. 
Hascall  v.  Life  Ass'n,  88. 

V.  Whitmore,  176,  310. 


420 


CASES   CITEL>. 


[The  flffures  refer  to  pages.] 


Hasey  v.  White  Pigeon  Beet-Sugar  Co.. 

15. 
Haskell  v.  Mitchell,  19G.  197. 

V.  Whitmore,  203. 
Hasliett  V.  Flint,  S3. 
Hastings  v.  Dollarhide,  210. 

V.  Thompson,  5U. 
Hatch  V.  Searles,  302. 

V.  Tiayes,  77. 
Hawkins  v.  Bone,  222. 

V.  Cardy,  128. 

V.  Watkins,  50. 
Haxtun  v.  Bishop,  187. 
Hayes  v.  Caulfield,  3li. 
Hayling  v.  Mullhall.  2S2. 
Haynes  v.  Rudd.  274. 
Hays  V.  Hathorn,  188. 

V.  Kingston,  202. 
Hayword  v.  Stearns,  202. 
Heard  v.  Dubuque  Co.  Bank,  45. 
Heartt  v.  Rhodes,  389,  391. 
Heath  v.  Blake,  234. 
Hebden  v.   Haitsink,   347. 
Hedger  v.  Steavenson,  354,  358. 
Hedges  v.  Sealy,  132,  193,  196. 
Heenan  v.  Nash,  87. 
Hegeman  v.  Moon,  32. 
Heiser  v.  Hatch,  244. 
Heman  v.  Francisco,  59. 
Henderson  v.  Appleton,  1G3. 

V.  Palmer,  274. 
Hendricks  v.  Judah,  314. 

V.  Thornton.  Go. 
Henrietta    Nat.    Bank   v.    State    Nat. 

Bank,  99. 
Henry  v.  Conley,  20. 

V.  Jones,  79. 

V.  Lee,  334. 
Henshaw   v.    Root,  389. 
Herbage  v.  McEntee,  136. 
Hereth  v.  Meyer,  44. 
Herrick  v.  Baldwin,  376. 

V.  Bennett,  47. 

V.  Carman,   138. 

V.  Whitney,  IGl. 

V.  Woolverton,  328. 
Heuertematte  v.  Morris,  146. 
Heylyn  v.  Adamson,  155.  325,  326. 
Heywood  v.  Pickering,  391. 
Hibernia  Nat.  Bank  v.   Lacombe,  159. 
Hickerson  v.  Raiguel.  296. 
Hickman  v.  Ryan,  370. 


Hicks  V.  Marshall.  221. 
Hidden  v.   Bishop,   178. 
Higgins  V.  Bullock,  134. 
Hlghuiore  v.  Primros*',  7(J. 
Hill  V.  Anderson,  209. 

V.  Bostick.  290. 

V.  Cooley,  238. 

V.  Lewis,  3,  15.  lOG,  137. 

V.  Northrup,   224,  270. 

V.  Wilson,  258. 
Hills  V.  Place,  347. 
Hilton  V.  Houghton,  271. 

V.  Shepherd,  3G2. 
Hinckley  v.  Union  I'ac.  R.  Co.,  202. 
Hine  v.  Allely,  158,  337. 
Hirsch  v.  Trainer,  221. 
Hirshfield  v.  Ft.  Worth  Nat.  Bank,  79 
Hitchcock  V.  Galveston.  21.3. 
Hoare  v,  Cazenove.  149,  152- 
Hobbs  V.  Straine,  3G4. 
Hobson  V.  Stevenson,  10. 
Hodge  V.  Fillis,  33G. 
Hodges  V.  Adams,  115. 

V.  Holland.  186. 

V.  Hunt,  209. 

V.  Nash,  174. 

V.  Shuler,  44,  356,  357. 

V.  Steward,  137,  172.  189,  194. 
Hodgkins  v.  Moulton,  183. 
Hoffman  v.  Bank  of  Milwaukee,  142^ 
144,  145. 

V.  Foster,  17G,  204. 
Hogan  V.  Moore,  255. 
Hogarth  v.  Latham.  312. 
Hoge  V.  Lansing,  309. 
Holbrook  v.  Burt,  190. 

V.  Vibbard,  127. 
Holcomb  v.  Wyckoff,  299. 
Holeman  v.  Hobson,  231. 
Holliday  v.  Atkinson,  182. 
Hollingsworth  v.  Moulton,  188. 
Holloway  v.  Quiun,  132. 
Holman  v.  Creagmiles,  2G6. 

V.  Johnson,  278. 
Holmes  v.  Jaques.  G3. 

V.  Kerrisou,  328. 

V.  Kidd,  202. 

V.  Trumper,  239. 
Holt  V.  Ross,  IIG,  148,  149. 
Iloltz  V.  Boppe,  339. 
Home  Ins.  Co.  v.  (Jreen,  356. 


CASES    CITED. 


421 


[The  figures  refer  to  pages.J 


Hook  V.  Pratt,  123,  124.  134. 

Hooper  v.  Williams,  04. 

Hoover  v.  McCormick,  378. 

Hopkins  v.  Detwiler,  20. 

Hopkinson  v.  Forster,  384,  305. 

Hopkirk  v.  Page,  374. 

Hopper,  In  re,  218. 

Hopps  V.  Savage,  60. 

Porne  v.  Redfearn,  49. 

Horst  V.  Wagner,  234. 

Horton  v.  Coggs,  3. 

Hortsman  v.  Henshaw,  14G,  118,  243. 

Hosstatter  v.  AVilson,  54. 

Hough  V.  Gray,  130. 

V.  Loriug.  95. 
Housatonic  Bank  v.  Laflin,  355. 
House  V.  Adams,  325. 
Housego  V.  Cowne,  354,  364. 
Houston  V.  Bruner,  140. 
Hovey  v.  Chase,  220. 

V.  Hobson,  217. 

V.  Sebriug,  186. 
Howard  v.  Ames,  200. 

V.  Duncan,  243. 

V.  Ives,  361,  370,  371. 

V.  Simpkins,  209. 
Howard   Banking   Co.   v.    Welchman, 

309. 
Howell  V.  Medler,  13. 
Howe  Mach.  Co.  v.  Hadden,  282. 
Howes  V.  Austin,  389. 
Howland  v.  Carson,  99. 
Hoxie  V.  Kennedy,  188. 
Hoyt  V.  Lynch,  30. 

V.  Seeley,  389. 
Hubbard  v.  Chapin,  309. 

V.  Moseley,  38. 

V.  Rankin,  254. 
Hubbell  V.  Flint,  278. 
Huff  V.  Wagner,  299. 
Hughes  V.  Jones,  218. 
Huguenim  v.  Baseley,  2.54. 
Humphreys  v.  Guillow,  235. 
Hunt  V.  Adams,  109. 

V.  Gray,  235,  242. 

V.  Massey,  209. 
Huntington  v.  Ballou.  235. 
Husband  v.  Epling,  38. 
Hutchins  v.  Hebbard,  74. 

V.  McCann,  171. 
Hyde  v.  Paige.  68. 
Hyne  v.  Dewdney,  32. 


Ilsley  V.  Jones,  82,  99,  170. 
Importers'  &  Traders'   Nat.   Bank  r. 
Littell,  172. 

V.  Shaw,  368. 
Ingalls  V.  Lee,  106,  164,  171,  232. 
Ingham  v.  Primrose,  311. 

V.  Vaden,  296. 
Iowa  College  v.  Hill,  307. 
Ireland  v.  Kip,  365,  366. 
Irvine  v.  Lowry,  50. 
Irving  Bank  v.  Wetherald,  90. 
Irving  Nat.  Bank  v.  Alley,  65. 
Iselin  V.  Rowlands,  188. 
Ivory  V.  Michael,  239. 


Jackson  v.  First  Nat.  Bank,  179. 

V.  Haskell,  113. 

V.  Henry,  230,  248. 

V.  Hudson,  88. 

V.  Johnson,  235. 

V.  King,  220. 

V.  Packer,  347. 

V.  Pigott,  84. 

V.  Richards,  368. 

V.  Warwick,  175. 
Jacobs  V.  Hart,  236. 
Jacquim  v.  Warren,  33. 
Jaffray  v.  Brown,  139. 
James  v.  Chalmers,  199,  313,  315. 

V.  Wade,  374. 
Jameson  v.  Swinton,  362,  369. 
Janson  v.  Thomas,  328. 
Jarvis  v.  Wilkins,  38,  42. 

V.  WUson,  82,  146. 
Jefferies  v.  Austin,  181,  26Q. 
Jeffries  v.  Lamb,   266. 
Jenkins  v.  Jenkins,  209. 

V.  Tongue,  187. 
Jenners  v.  Howard,  222. 
Jenney  v.  Herle,  40.  43. 
Jennings  v.  Roberts,  361. 
Jennison  v.  Parker,  349. 

V.  Stafford,  77. 
Jenys  v.  Fowler,  183. 
Jerome  v.  Bigelow,  272. 

V.  Whitney,  51. 
Jeune  v.  Ward,  95,  96. 


422 


CASES    CITED. 


[The  figures  refer  to  pages.] 


Jewett  V.  Cook,  12. 

Johu  V.  City  Mat.  Bank,  36G. 

Johnson  v.  Bank  of  Fulton,  169. 

V.  Collings,  93,  95,  98,  101. 

V.  Donnell,  122. 

V.  Frisbie,  56. 

V.  Haight,  335,  348. 

V.  Heagan,  241. 

V.  Medlicott,  222. 

V.  Mitchell,  113,  117. 

V.  Stone,  220. 

V.  Titus,  265. 

V.  Way,  111,  301,  304. 
Jones  V.  Berryhill,  175. 

V,  Carter,  10. 

V.  Conncil  Bluffs  Bank,  99. 

V.  Fales,  50. 

V.  Fort,  296. 

V.  Gordon,  319. 

V.  Iowa  State  Bank,  98. 

V.  Lees,  276. 

V.  Lewis,  365. 

V.  Savage,  346,  349. 

V.  Shawhan,  20. 

V.  Simpson,  55. 
Jordan  v.  Tate,  40. 

V.  Wheeler,  46,  327. 
Joseph  V.  Bigelow,  313. 
Josselyn  v.  Ames,  113. 

V.  Lacier,  35,  41,  43,  77. 
Judah  V.  Harris,  50. 
Judd  V.  Seaver,  171. 
Judson  V.  Corcoran,  10. 

V.  Gookwin,  15,  110,  130. 
Jullliard  v.  Chaffee,  74. 
Juniata  Bank  v.  Hale,  345,  355,  376. 
Jury  V.  Barker,  42. 

Justh  V.  National  Bank  of  Common- 
wealth, 249. 


K 


Kasson  v.  Smith,  177. 
Kearslake  v.  IMorgan,  347. 
Keene  v.  Beard,  384-386,  395. 
Keith  V.  Jones,  50. 
Kelley  v.  Brooklyn,  43. 

V.  Hemmingway,  38. 

V.  Mayor,  etc.,  of  Brooklyn,  379. 
Kellogg  V.  Curtis,  318,  319. 

V.  Fancher,  297. 


Kellogg  V.  Olmsted,  20. 

V.  Schaake,  202. 
Kelly  V.  Burroughs,  132,  174. 

V.  Solari,  166. 
Kendall  v.  Robertson,  --7>. 
Kennedy  v.  Crandell,  242. 

V.  Geddes,  101,  371. 

V.  Goodman,  181, 
Kent  V.  Walton,  228. 
Kenworthy  v.  Sawyer,  164. 
Kenyon  v.  Knights  Templar  &  Mason- 
ic Mut.  Aid  Ass'n,  31. 
Ketcham  v.  Baroer,  227,  228. 
Ketchell  v.  Burns,  130. 
Keteltas  v.  Myers,  71,  134. 
Key  V.  Flint,  178. 
Kidder  v.  Horribin,  313. 
Kieffer  v.  Ehler,  301. 
Kimball  v.  Huntington,  1,  6,  77. 
King  V.  Bickley,  354,  360. 

V.  Crowell,  323,  335. 

V.  Ellor,  30. 

V.  Fleming,  271. 
Kings  Co.  El.  R.  Co..  In  re,  216. 
Kingsbury  v.  Wall,  38. 
King's  Estate,  In  re,  183. 
Kingsland  v.  Koeppe,  107. 
Kingston  v.  Long,  38. 
Kingston  Bank  v.  Eltinge,  244. 
Kinne  v.  Ford,  71. 

V.  Johnson,  2.54. 
Kinsley  v.  Robinson,  372. 
Kinyon  v.  Stanton,  389. 
Kinzie  v.  Farmers'  &  Mechanics'  Bank. 

70. 
Kirk  V.  Doage  Co.  M.  Ins.  Co.,  45. 
Kirkman  v.  Bank  of  America,  72. 
Kirksey  v.  Bates,  284. 
Kiskadden  v.  Allen,  40. 
Kitchel  V.  Schenck,  174,  228. 
Kitchen  v.  Place,  251. 
Kleeman  v.  Frisbie,  190. 
Klein  v.  Keyes,  182. 
Knight  V.  Hunt,  175. 

V.  Jones,  63. 
Knights  V.  Putnam,  2.30,  231. 
Knisely  v.  Sampson,  75. 
Knox  V.  Clifford,  272. 
Knutz  V.  Tempel,  333. 
Koch  V.  Howell,  9.5. 
Kohler  v.  Montgomery,  335. 
Komes  v.  Smyth,  295. 


CASES    CITED. 


423 


[The  figures  refer  to  pages.] 


Konig  V.  Bayard,  103. 
Kreiss  v.  Seligman.  278. 
Kulenkamp  v.  Groff,  ISli. 
Kuntz  V.  Temple,  Ti). 
Kyle  V.  Thompson,  133. 
Kyne  v.  Erskiue,  281. 


Labouchere  v.  Tupper,  67. 
Laclede  Bank  v.  Sehuler,  397. 
La  Coste  v.  De  Armas,  187. 
Lafayette  Ins.  Co.  v.  Rogers,  134. 
Lafliu  V.  Sherman,  187. 
Lambert,  Ex  parte,  151. 

V.  Heath,  162. 

V.  Oakes,  160,  325. 
L'Amoureaux  v.  Crosby,  218,  219. 
Lamourieux  v.  Hewit,  130. 
Lancaster  Bank  v.  Woodward,  393. 
Lancaster  Co.  Bank  v.  Moore,  218. 
Lancaster   Nat.    Bank  v.   Taylor,   196, 

197. 
Lancey  v.  Clark,  175,  281. 
Lane  v.  Krekle,  66. 

V.  Smith.  190. 
Langenberger  v.  Kroeger,  343. 
Langston  v.  Corney,  94. 
Langton  v.  Lazarus,  236. 
La  Rose  v.  Logansport  Nat.  Bank,  109. 
Larsen  v.  Breene,  399. 
La  Touche  v.  La  Touche,  258. 
Law  V.  Parnell,  187. 
Lawrence  v.  American  Nat.  Bank,  244 

V.  Clark,  296. 

V.  Dougherty,  49. 

V.  Miller.  300. 

V.  Willis,  219. 
Lawson  v.  Farmers'  Bank,  165,  370. 

V.  Lovejoy,  209. 

V.  Weston,  303. 
Laxton  v.  Peat,  289. 
Lay  V.  Wissman,  299,  309. 
Lazier  v.  Hnrnn,  347. 
Leach  v.   Hewitt,  373. 
Leather  Cloth  Co.  v.  Lorsont.  276. 
Leavitt  v.  Putnam,  115,  125,  126,  193. 
199,  200,  285. 

V.  Simes,  335. 
Lebel  v.  Tucker,  112. 
Lecaan  v.  Kirkman,  140. 


Ledwich  v.  McKim,  251. 
Lee  V.  Baleom,  33. 

V.  Green,  20. 

V.  Murdoch.  237. 

V.  Starbird,  239. 

V.  Swift,  6. 

V.  Wilcocks,  53.  109. 
Leeds  v.  Lancashiie,  121,  24L 
Leftley  v.  Mills,  342. 
Legge  V.  Thorpe,  374. 
Leggett  V.  Cooper,  264. 

V.  Jones,  56. 
Legro  V.  Staples,  55. 
Lehman  v.  Jones,  340,  376. 
Leiber  v.  Goodrich,  50. 
Leland  v.  Frauham,  314. 
Le  Neve  v.  Le  Neve,  207,  300. 
Lenheim  v.  Fay,  111. 
Lennig  v.  Ralston,  317. 
Lenox  v.  Leverett,  150. 

V.  Roberts,  78,  369. 
Leonard  v.  Gary,  378. 

V.  Mason,  44,  54. 

V.  Vredenbm'g,  109. 
Leslie  V.  Hastings,  92. 

V.  Lorillard,  276. 
Lester  v.  Given,  385,  391,  393,  394. 
Lett  V.  Morris,  7. 
Lewis  v.  Berry,  42. 

V.  Cosgrave,  264. 

V.  Davisson,  20. 

V.  Gompertz,  357. 

V.  Hathman,  131. 

V.  Hodgdon,  186. 

V.  Kramer,  237. 

V.  Lady  Parker,  314. 

v.  Payn,  235. 

V.  Pead,  219. 
Lightbody  v.  Ontario  Bank,  264. 
Lincoln  v.  Buckmaster,  220. 

V.  Stevens.  175. 
Linden  v.  Rokes,  203. 
Lindsay  v.  Price,  113. 
Lindus  v.  Bradwell,  83. 
Lisle  V.  Rogers,  237. 
Littauer  v.  Goldman,  162. 
Littell  V.  Hord,  172. 
Little  V.  O'Brien,  187. 

V.  Phenix  Bank,  384,  388,  389. 

V.  Slackford,  2y. 
Littlefield  v.  Bank,  190. 

V.  Hodge,  43. 


424 


CASES    CITED. 


[The  figures  refer  to  pages.] 


Livingston  v.  Hastie,  172. 
Lloyd  V.  Keach,  233. 

V.  Oliver,  31. 

V.  Sigourney,  123,  124,  305. 
Lockwood  V.  Crawford,  338. 
Lodge  V.  Phelps,  18'J. 

V.  Spooner,  IG'J. 
Logan  V.  Attix,  20. 
Lomax  v.  Picot,  119. 
London     &     Southwestern     Bank     v. 

Wentworth,  S3. 
Long  V.  Moore,  237. 
Loomis  V.  Pulver,  328. 

V.  Ruck,  254,  255. 
Losee  v.  Dunkin,  202.  330. 
Louisiana  State  Bank  v.  Ilowel,  364. 
Lovejoy  v.  Whipple,  271. 
Lovell  V.  Evertson,  187. 

v.  Hill,  42. 
Lovett  v.  Cornwell,  392. 
Lowe  V.  Bliss,  56. 

V.  Waller,  184,  232.  ' 
Lowery  v.  Steward,  7. 
Lowes  V.  Mazzaredo,  231,  232. 
Lowry  v.  Steele,  377. 
Lowy  V.  Andreas,  15. 
Loyd  V.  McCaffrey,  395. 
Lubbering  v.  Kohlbrecher,  235. 
Lucas  V.  James,  58. 

V.  Ladew,  47,  326. 

V.  Pitney,  214. 
Luckey  v.  Pepper,  328. 
Luff  V.  Pope,  29. 
Lumley  v.  Palmer,  94. 
Lunt  V.  Adams,  334. 
Lynn  v.  Bell,  384. 
Lyon  V.  Marshall.  63. 

V.  Mitchell,  274. 
Lysaght  v.  Bryant,  363. 


M 


McCaffrey  v.  Dustin,  200. 

McCall  V.  Taylor,  GO. 

McCamant  v.  Miners'  Trust  Co.  Bank, 

126. 
McCaskill  v.  Connecticut  Sav.  Bank, 

29. 
McClain  v.  Davis,  220. 

v.  Weidemeyer,  189. 
M'Crillis  v.  How,  208. 


McCuUoch  V.  Hoffman,  182. 
McCuue  V.  Belt,  356. 
McDoal  V.  Yeomans,  130. 
McDonald  v.  Hodge,  52. 

V.  Muscatine  Nat  Bank,  251. 
McEvei-s  V.  Mason,  98. 
McGehee  v.  Posey,  52. 
McGinn  v.  Holmes,  23. 
McGinnis  v.  Com.,  218. 
McGrade  v.  German  Sav.  Inst.,  394. 
McGrath  v.  Clark,  239. 
MacGregor  v.  Rhodes,  160. 
JIcGruder    v.    Bank   of    Washington, 

340,  375,  376. 
]McGuire  v.  Bidwell,  20. 
Mclntire  v.  Preston,  214. 
Macintosh  v.  Haydou,  238. 
McKenna  v.  Kirkwood,  190. 
AtcKenzie  v.  British  Linen  Co.,  243. 
McKinnell  v.  Robinson,  277. 
^Mackintosh  v.  Eliot  Nat.  Bank,  144. 
McKleroy  v.  Southern  Bank  of  Ken- 
tucky, 144. 
McKnight  v.  Knisely,  295,  297. 

V.  Wheeler,  164. 
McKyring  v.  Bull,  314. 
McLaren  v.  Hall,  20. 

V.  Watson's  Ex'rs,  130. 
McLaughlin,  In  re,  218. 

V,  McGovern,  165. 
McLean   v.   Clydesdale   Banking   Co., 

384,  404. 
IMacleed  v.  Snee,  43. 
McLemore  v.  Powell,  289. 
McMinn  v.  Richmond?.  208. 
McMullen  v.  Rafferty,  8,  13. 
McMurchy  v.  Robinson,  78. 
McNamee  v.  McNamee,  270. 
McNeil  V.  McCamley,  21. 
McNeilage  v.  Holloway,  211. 
Macomb  v.  Wilkinson,  183. 
McSharran  v.  Neeley,  74. 
McWilliam  v.  Webb.  9. 
Magee  v.  Badger,  303,  304. 
Magruder   v.    Union   Bank,   338.   345, 

348,  377. 
Maitland  v.  Citizens'  Nat.  Bank,  299. 
Mammon  v.  Hartman,  140. 
^Manchester  Bank  v.  Fellows,  364. 
Mandeville  v.  Marvin,  171. 

V.  Newton,  122,  U;2. 

V.  Welch.  7,  81. 
Mangles  v.  Dixon,  190. 


CASES    CITED. 


425 


[The  figures  refer  to  pases.] 


Mann  v.  Moors,  3G7. 
Manning  v.  Kolin,  169. 

V.  McClure,  295. 
Manrow  v.  Durham,  110. 
Manwaring  v.  Harrison,  331. 
Marine  Nat.    Bank   v.    National   City 

Bank,  239,  244,  397. 
Mai-ion  &  M.  R.  R.  v.  Hodge,  142. 
Marr  v.  Johnson,  303. 
Marsh  v.  Marshall,  202. 
Marsliall   v.  Baltimore  &   O,   R.   Co., 
274. 

V.  Claiy,  86. 

V.  Marshall,  21. 

V.  Rockwood,  71,  134. 
Mai-ston  v.  Allen,  134,  135,  251. 
Martendale  v.  Follett,  240,  242. 
Martin  v.  Chauntry,  54. 

V.  Franklin,  169. 

V.  Mayo,  209. 
Jilarvin  v.  McCuUum,  70. 
Marvine  v.  Hymers.  214,  228. 
Marzetti  v.  Williams,  403,  404. 
Mason  v.  Dousay,  93,  401. 

V.  Franklin.  158,  326,  337. 

V.  Lord,  230. 

V.  Mason,  173. 

V.  Morgan,  194. 

V.  Noouan,  314. 
Massachusetts  Bank  v.  Oliver,  357. 
Massachusetts   Loan  &   Trust   Co.   v. 

Welch,  190. 
Massey  v.  Paola  Bldg.  &  Sav.  Ass'u. 

215. 
Master  v.  Miller,  234,  236. 
Masters  v.  Ibberson,  310. 
Materne  v.  Horwitz,  272. 
Mathews  v.  Aikin,  2S8. 
Matteson  v.  Ellsworth,  242. 

V.  Moulton,  90. 
Matthews  v.  Bloxsome,  127. 

V.  Haydon,  345. 

V.  Houghton,  49. 
Matthiessen  v.   IMcMahon,  217. 
Mattison  v.  IMarks,  35,  40. 
Maule  V.  Crawford,  6,  15. 
Mauran  v.  Lamb,  186,  199,  283. 
Maxon  v.  Maxon,  31. 
Maxwell  v.  Vansant,  113. 
May  V.  Chapman,  301,  310. 

V.  Coffin,  128. 

V.  Hewitt,  69. 


May  V.  Kelly,  88. 

V.  Miller,  60. 
Mayberry  v.  Morris,  297, 
Mayer  v.  Heidelbach,  297. 
Meacher  v.  Foit,  164,  244. 
Mead  v.  Engs,  363,  370. 

V.  Iveeler,  214. 

V.  Small,  378. 

V.  Young,  115,  243. 
Meadow  v.  Bird,  295. 
Meads  v.  Merchants'  Bank,  397,  398. 
Mechanics'  Bank  v.  Griswold,  379. 

V.  Merchants'  Bank,  78. 

V.  Straiton,  16,  65,  314. 
Mechanics'    Banking    Ass'n    v.    New 

York  &  S.  W.  L.  Co.,  215. 
Mechanics'  &  F.  Bank  v.  Wixson,  298. 
Mechanics'  &  Traders'   Bank  v.   Bar- 

nett,  299. 
Mechanics'    &    Traders'    Ins.    Co.    v. 

Coons,  392. 
Mechanics'   &  Traders'   Nat.   Bank  v. 

Crow.  317. 
Meeker  v.  Shanks,  70. 
Megginson  v.  Harper,  63. 
Mellish  V.  Rawdon,  346. 

V.  Simeon,  157. 
Meltzer  v.  Doll,  258. 
Mendez  v.  Carreroon,  283. 
Mercantile  Bank  v.  Cox,  101. 
Mercer  v.  Lancaster,  367. 
:\Iercer  Co.  v.  Hacket,  199. 
Merchants'  Bank  v.  Birch,  357. 

V.  Elderkin.  338. 

V.  Spicer,  58,  344. 

V.  State  Bank,  397. 
Merchants'  Loan  &  Trust  Co.  v.  Clair 

188. 
Merchants'   Nat.   Bank  v.   Eagle  Nat 
Bank.  144. 

V.  Hewett,  10. 

V.  State  Nat.  Bank,  384,  385,  391, 
397. 
Meridian  Nat.  Bank  v.  Gallaudet,  162. 
Merrick  v.  Boury,  20. 
Merritt  v.  Benton,  169. 

V.  Cole,  283. 

V.  Earle,  270. 

V.  Todd,  47,  327,  329. 

V.  Woodbury,  354,  363. 
Mersman  v.  Werges,  234. 
Mertens  v.  Winnington,  150. 


426 


CASES    CITED. 


[Tbe  figures  refer  to  pages.] 


Messenger  v.  Southey,  355. 
Metcalfe  v.  Richardson,  3(54. 
Metropolitan  Nat.  Bank  of  Chicago  v. 

Jones,  39S. 
Meyer  v.  Hibsher,  173,  175,  338,  339, 
341. 
V.  Huncke,  242. 
Meyers  v.  Phillips,  36. 
Michigan  Ins.  Bank  v.  Eldred,  1. 
Michigan  Ins.  Co.  v.  Leavenworth,  70. 
Miei'S  V.  Brown,  355,  3G0. 
Miles  V.  Lingerman.  209. 
Milford  V.  Mayer,  32G. 
Milks  V.  Rich,  1G3. 
Miller  v.  Biddle,  15,  48. 
V.  Crayton,  305. 
V.  Excelsior  Stone  Co.,  38. 
V.  Finley,  223,  304. 
V.  Gambie,  72. 
V.  Gilleland,  237. 
V.  Hackley,  158,  352,  367. 
V.  Hull,  232. 
V.  Larned,  17G,  184. 
V.  Neihaus,  93. 
V.  Pollock,  136. 
V.  Race,  111,  199. 
V.  Talcott,  203,  309. 
V.  Thompson,  31. 
V.  Thomson,  142. 
V.  Wood,  266. 
V.  Zeimer,  232. 
Minis  V.  Barber,  183. 
Mills  V.  Bank  of  United  States,  355, 
358,  391. 
V.  Mills,  274. 
Milne  V.  Graham,  189. 
Milton's  Case,  2. 
Miner  v.  Paris  Exch.  Bank,  229. 
Minet  v.  Gibson,  314. 
Mining  Co.  v.  Anglo-Californian  Bank, 

213. 
Minor  v.  Bewick,  132. 
Minot  V.  Russ,  384,  399.  400. 
Minturn  v.   Fisher,  382. 
Mitchel  V.  De  Grand.  324.  335. 
MitcheU   v.   Baring,   339. 
V.  Cross,  370. 
V.  Culver,  75,   251,  314. 
V.  Fuller,   113,  117. 
V.  Reynolds,  275. 
V.  Rome  R.  Co..  215. 


Mix   V.   National    Hank   of   Blooming* 

ton,  297. 
Mobley  v.  Clark,  372. 

V.  Ryan,  314. 
Mohawk  Bank  v.  Corey,  177,  178. 
Moiese  v.  Knapp,  60. 
Moline,  Ex  parte,  358. 
Molton  V.  Camroux,  217,  221. 
Money  v.  Ricketts,  202. 
Monroe  v.  Hoff,  23. 
Montague  v.  I'erkins,  312. 
Montehus  v.  Charles,  46,  327. 
Montgomery  v.   Crossthwait,  240. 
Montross  v.    Clark,   175. 
Monument  Nat  Bank  v.  Globe  Works, 

215. 
Moody  V.  Threkeld,  63. 
Moore  v.  Fitz,  21. 
V.  Baird,  317. 
V.  Cross,  136,  139,  175. 
V.  Hershey,  217.  218. 
V.  McClure,  69. 
V.  Maple.  186. 
V.  Moore,   307. 
V.  Ryder,  296. 
V.  Waitt.  339. 
V.  Warren,  331. 
Mooi-man  v.  State  Bank,  357. 
Moran    v.    Commissioners    of    Miami 

Co.,  199. 
Mordecai  v.  Dawkins,  277. 
More  V.  Mauniog,  11.5.  125,  103,  305. 
Morehead  v.  Parkersburg  Nat.   Bank, 

238. 
Morford  v.  Davis,  164. 
Morgan  v.  Bank  of  Louisville,  374. 
V.  Fallenstein.  266. 
V.  Reintzel.  282. 
V.  U.   S..  202. 
V.  Van  Ingen,  352,  362. 
V.  Woodworth,  363. 
Morley  v.  Culverwell,  284,  318. 
Mornyer  v.  Cooper,  310. 
Morris  v.  Foreman.  113. 
V.  Lee,  33,  49. 
V.  Poillon,  189. 
V.  Preston,   114. 
Morrison  v.  Bailey,  29,  382. 
Morris  Run  Coal  Co.  v.  Barclay  Coal 

Co.,  275. 
Morrow  v.  Brown.  266. 


CASES    CITED. 


427 


IThe  figures  refer  to  pages.] 


Morse  V.  Cliamberlin,  367. 

V.  Massachusetts  Nat.   Bank,   385, 
401. 
Morse  Twist  Drill    &    Macb.   Co.  v. 

Morse,  276. 
Morton  v.  Naylor,  7,  40. 

V.  Steward,  208. 

V.  Thurber,  228. 

V.  Westcott,  367. 
Moses  V.  Ela,  379. 

V.  Franklin  Bank.  392,  395. 

V.  Lawrence  Co.   Bank,   109. 
Mosher  v.  Carpenter,  164. 
Moss  V.  Averell,  213. 

V.  Harpeth  Academy,  213. 

V.  Oakley,  214. 
Mott  V.  Havana  Nat.  Bank,  44. 

V.  Hicks,  08,   69,   118,  214. 
Mt.  Mansfield  Hotel  Co.  v.  Bailey,  128. 
Moxon  V.  Pulling,  106. 
Moynaban  v.  Hanaford,  136. 
Muilman   v.   D'Eguino,   46,   324,  330, 

331. 
Muir  V.  Crawford,  290. 
Mulherrin  v.  Hannum,  347. 
Muller  V.  Pondir,  196. 
Mullick  V.  Radakissen,  324,  329,  384. 
Munger  v.  Shannon,  7,  41. 
Munn  V.  Baldwin,  367,  368. 

V.  Burch,  394. 

V.  Commission  Co.,  170,  172,  213, 
232. 
Munroe  v.  Easton,  348. 
Murdock  v.  Mills,  98. 
Murphy  v.  Keyes,  183. 

V.  Lippe,  265. 
Murray  v.  Beckwith,  184. 

V.  East  India  Co.,  347. 

V.  Judah,  161. 

V.  Lardner,  304,  306. 
Mussey  v.  Eagle  Bank,  397,  398. 
Musson  V.  Lake,  127,  160,  322,  349. 
Mustard  v.  Wohlford's  Heirs,  209. 
Mutual  Life  Ins.  Co.  v.  Hunt,  221. 
Mutual  Nat.  Bank  v.  Rotge,  400. 


N 


Nagle  V.  Homer,  86. 

V.  Lyman,  100. 
Nailor  v.  Bowie,  323. 


Nance  v.  Lary,  253. 
Nash  V.  Towue,  68. 
Nason  v.  Bai-ff,  95. 
Nassau  Bank  v.  Jones,  213. 
National  Bank  v.  Dorset  Marble  Co., 
137. 
V.  Green,  171,  232. 
V.  Kirby,  318,  319. 
V.  Millard,  395. 
National  Bank  of  America  v.  Indiana 

Banking  Co.,  394. 
National   Bank  of  Commonwealth   v. 

Law,  109. 
National  Bank  of  North  America  v. 

Bangs,  144. 
National  Bank  of  Oxford  v.  Kirk,  274, 
National   City   Bank   of   Brooklyn   v. 

Westcott,  123. 
National  Commercial  Bank  v.  Miller, 

395.  397,  399. 
National    Exch.    Bank    v.    Veneman, 

253,  254. 
National  Mahaiwe  Bank  v.  Peck,  403. 
National  State  Bank  v.  Rising,  235. 
Nay  V.  Lamb,  202. 
Nazro  v.  Fuller,  238. 
Neeley  v.  McSparran,  222. 
Neff  V.  Horner,  234,  239. 
Nelson  v.  Edwards,  188. 

V.  First  Nat.  Bank,  100,  101. 
V.  Fotterall,  335,  344. 
Nevada  Bank  v.  Luce,  100. 
Nevius  V.  Bank,  364,  366. 
Newall  V.  Hussey,  22. 
Newark     Banking     Co.     v.     National 

Bank  of  Erie,  327. 
Newberry  v.  Trowbridge,  155. 
Newcomb  v.  Raynor,  288. 
Newell  V.  Doty,  178. 
Newman  v.  Goza,  169. 
V.  Ravenscroft,  131. 
V.  Williams,  232. 
New  Orleans  Canal  &  Banking  Co.  v. 

3Iontgomery,  314. 
Niagara  Dist.  Bank  v.  Fairman  &  W. 
Mach.    Tool    Manuf'g    Co.,   86,    339, 
341. 
Nicholls  V.  Diamond,  83,  89. 
Nichols  v.  Blackmore,  324,  331. 
V.  Fearson,  232. 
V.  Goldsmith,  338. 
V.  Johnson,  235. 


428 


CASES    CITED. 


[The  figures  refer  to  pages.] 


Nicholson  v.  Gouthit,  3GS. 

V.  Sedgwick,   137,   189,   194. 
Niclierson  v.  Ruger,  249. 

V.  Swett,  234. 
Nightingale  v.  "SVithington,  210. 
Noble  V.  Walker.  171,  232. 
Nobles  V.  Bates,  275. 
Noel  V.  Murray,  22. 
Norris  v.  Despard,  374,  392. 

V.  Langley,  270,  272.  , 

V.  Solomon,  30. 
Northam  v.  Latouche,  223,  2G9. 
Northampton    Nat    Bank    v.    Kidder, 

292,  309,  319. 
Northwestern  Coal  Co.  v.  Bowman,  367. 
Northwestern   Iron  Co.  v.  Meade,  82. 
Norton  v.  Dreyfuss,  265. 

V.  Ellam,  328. 

V.  Lewis,  378. 

V.  Waite,  297. 
Norwich  Bank  v.  Hyde,  313. 
Nourse  v.  Prime,  226. 
Noxon  V.   Smith,  62. 
Noyes  v.  Gilman,  189. 
Nutting  V.  Burked,  46. 


o 


Oakey  v.  Wilcox,  238. 
Oakley  v.  Boorman,  107. 
Oates  V.  Bank,  14,  230. 
Oatman  v.  Taylor,  45. 
O'Brien  v.  Smith,  391. 
Ocean  Bank  v.  Dill,  121. 

V.  Fant,  323. 

V.  Williams,  342. 
Ocean  Nat.  Bank  v.  Carll,  249. 
Ocoee  Bank  v.  Hughes,  350. 
O'Conner  v.  Hurley,  20. 
Oddie  V.  National  City  Bank,  402. 
Odell  V.  Buck,  219. 
Ogden  V.  Saunders,  164,  333. 
Ohio  &  M.  R.  Co.  V.  Kasson,  230. 
Okie  V.  Spencer,  2S8. 
Olcott  V.  Tioga  R.  Co.,  215. 
Oliver  v.  Bank  of  Tennessee,  373. 
Olsen  V.  Ensign,  260,  312. 
Olvey  V.  Jackson,  20. 
Onondaga  County  Bank  v.  Bates,  172. 
Ord  v.  Portal,  186. 
Oregon  Steam  Nav.  Co.  v.  Winsor,  276. 


Oridge  v.  Sherborne,  47,  78,  334. 
Oriental  Bank  v.  Blake,  377. 
Ormes  v.  Beadol,  255. 
Ormsbee  v.  Howe,  249. 
Orr  V.  Lacy,  187. 

V.  Maginnis,  325. 
Orrick  v.  Colston,  100. 
Ort  V.  Fowler,   254. 
Osgood  V.  Artt,  196. 

V.  Pearsons,  62. 
Osgood's  Adm'rs  v.  Ortt,  107. 
Osmond  v.  Fitzroy,  219. 
Otis  V.  Cullum,  162. 
Otisfield  V.  Mayberry,  322. 
Otsego  County  Bank  v.  Warren,  327. 
Oulds  V.  Harrison,  203. 
Outhwaite  v.  Luntley,  236. 
Outhwite  V.  Porter,  295. 
Overman  v.  Hoboken  City  Bank,  95, 

401. 
Overton  v.  Tyler,  54. 
Owen  V.  Barnum,  45. 

V.  Lavine,  86. 

V.  Van  Uster,  89. 
Owings  V.  Ai-not,  236. 


Pack  V.  Thomas,  389. 
Pagan  v.  Wylie,  239. 
Page  v.  Gilbert,  358. 

V.  Heineberg.  213. 

V.  Morrell,  251. 
Paine  v.  Noelke,  6. 
Palm  V.  Watt,  243. 
Palmer  v.  Field,  175. 

v,  Pratt,  38. 

V.  Stephens,  58. 
Pannell  v.  M'Mechen,  289. 
Pardee  v.  Lindley,  133. 
Parish  v.  Stone,  267. 
Park  Bank  v.  Watson,  297,  299. 
Parker  v.  City  of  Syracuse,  42. 

V.  Conner,   303. 

V.  Gordon,   334.   369. 

V.  Greeie.  98. 

V.  Stroud,  47,  329,  341,  34a 

V.  Totten,  187. 
Parkin  v.  Moon,  314. 
Parmelee  v.  Thompson,  20. 
Parr  v.  Eliason,  231,  317. 


CASES    CITED. 


429 


[The  figures  refer  tc  pages.] 


Partridge  v.  Badger,  214. 

V.  Davis,  110.   130. 
Passumpsic  Banli  v.  Goss.  252. 
Patience  v.  Towuley,  332,  375. 
Paton  V.  Coit.  209,  318. 
Patten  v.  Pancoast,  31. 
Patterson  v.   McNeeley,   239. 

V.  Marine   Nat.  *  Banli,   403. 

V.  Todd,  201. 
Pattinson  v.   Lucliley,  234. 
Payne  V.   Cutler.   290. 
Peabody  Ins.  Co.  v.  Wilson,  366. 
PeacoclJ  V.  Pursell,  349. 

V.  Rhodes,  110,  313. 
Pearce  v.  Williins,  174. 
Pearson  v.  Bank  of  Metropolis,  339. 

V.  Garrett.  38. 

V.  Pearson,  263. 

V.  Stoddard,  79. 
Pease  v.  Dwight,  131. 

V.  Hirst,  131. 

V.  Pease,  68. 

V.  Warren,  283. 
Peaslee  v.  Robbius,  314. 
Peck  V.  Cochran,  92. 

V.  Mayo,  326. 
Peets  V.  Bratt,  71,  134. 
Peirce  v.  Peudar,  306. 
Pellecat  v.  Angell,   278. 
Pennington   v.   Baehr,   382. 
Penny  v.  Innes,  126. 
Pentz  V.  Winterbottom,  116,  117. 
People  V.  Cromwell,  346. 

V.  D'Argencour,  242, 

V.  McDennott,  77. 

V.  Tax  Com'rs,  219. 
People'.s  Bank  v.  Legrand,  290. 
Perkins  v.  Franklin  Bank,  78. 

V.  White,  309. 
Perley  v.  Perley,  6,  260. 
Perrine  v.  Canal  Co.,  213. 

V.  Hotchkiss,    227. 
Perry  v.  Smith,  52. 
Peterson  v.  Hubbard.  83. 

V.  Jolinson.  266. 
Petit  V.  Benson,  84. 
Peto  V.  Reynolds,  61. 
Pettee  v.  I'rout,  12,  185. 
Phelan  v.  Moss,  304. 
Phelps  V.  Church,  109. 

V.  People,  242. 

V.  Stocking,  3U6,  367. 


Phelps  V.  Vischer,  138. 

Philadelphia    Bank    v.    Newkirk,    55, 

56. 
Phillips  V.  Ford,  58. 

V.  Franklin,  347. 

V.  Gould,  358,  364. 

V.  Poindexter,  345. 

V.  Thurn,  153. 

Philpott  V.  Bryant,  325,  338.  * 

Phipson  V.  Kneller,  378. 
Phoenix  Bank  v.  Hussey,  26. 
Phoenix  Ins.  Co.  v.  Allen,  46,  50. 

V.  Church.  296.  297. 

V.  Gray,  46. 
Pickett  V.  Merchants'  Nat.  Bank,  229. 
Pier  V.   Heinrichshofen.  327. 
Pierce  v.   Kitti'edge,  93,  96. 

V.  Schaden,  363. 

V.  Struthers,  158. 
Piersol  v.  Grimes.  235. 
Pierson  v.  Duulop,  98. 

V.  Hutchinson,  322. 
Pigot's  Case,  234,  240. 
Pike  V.  Irwin.  101. 

V.  Street,  119. 
Pilkington  v.  Scott,  259, 
Pillans  V.  Van  Mierop,  98.  99. 
Pilliam  v.  Withers,  240. 
Pinard  v.  Klockmann,  27. 
Pindar  v.  Barlow,  270,  272. 
Pine  V.  Smith,  201. 
Piner  v.  Clary,  351. 
Piukham  v.  INIacy,  359. 
Pinnes  v.  Ely,  118. 
Pinney  v.  Gleason,  52. 
Pitman  v.  Breckenridge,  41. 
Pitney  v.  Glens  Falls  Ins.  Co.,  31. 
Pixley  V.  Boynton,  277. 
Plantei-s'  Bank  v.  Sharp,  214 
Planters'  Bank  of  Tennessee  v.  Evans, 

128. 
Plato  V.  Reynolds,  325, 
Piatt  V.  Beebe,  299. 
Plets  V.  Johnson,  65. 
Plummer  v.   Lyman,  101. 
Pockliugton  v.  Silvester,  332. 
Polk  V.  Spinks,  375. 
Pollock  V.  Helm,  99. 
Pomeroy  v.  Tanner,  174. 
Poole  V.  Rice,  21. 
Poorman  v.  Mills,  331. 
Pope  V.  Bank  of  Albion,  397. 


430 


CASES    CITED. 


[Tlie  fisuros  refer  to  pages.] 


Pope  V.  Linn,  271,  272. 
Poplett  V.  Stockdale,  272. 
Porter  v.  City  of  Janesville,  G4. 

V.  Cu:«limau,  2S3. 

V.  Kimball,  378. 

V.  Pittsburg    Bessemer   Steel    Co., 
310. 
Porthouse  v.  Parker,  377. 
Potter  V.  Pearson,  4. 

V.  Tubb,  209. 
Potts  V.  Mayer,  29G.  30S. 

V.  Whitehead,  82. 
Powell  V.  Jones,  1)4. 

V.  Monnier,  99. 

V.  Waters,   177,  178,  232,  290. 
Powers  V.  French,  1S2. 
Prentiss  y.  Graves,  121. 
Prescott  Bank  v.  Caverly,  40,  331. 
President,  etc.,  of  Turnpike   Road   v. 

Hurtin,  1.  G. 
President,  etc.,  of  Union  Bank  v.  Wil- 
lis, 137. 
Preston  v.  Whitney,  45. 
Prevot  V.  Abbott,  131. 
Price  V.  Campbell,  22G. 

V.  Easton,  83. 

V.  Neal,  58,  143,  144,  313. 

V.  Young,  345. 
Priddy  v.  Henbrey,  172. 
Prideaux  v.  Criddle,  391. 
Printing  &  Numerical  Registering  Co. 

V.  Sampson,  275. 
Pritchard  v.  Fox,  170. 

V.  Hirt,  188. 
Prosser  v.  Luqueer,  130. 
Prouty  V.  Roberts,  184. 

V.  Wilson,  290. 
Prutsman  v.  Baker,  74. 
Puget  de  Bras  v.  Forbes.  181. 
Pugh  V.  McCormick,  378. 
Pumpelly  v.  Phelps,  69. 
Pureell  v.  Allemong,  389,  393. 
Putnam  v.  Sullivan,  253,  313,  340,  37G. 


Q 

Quackenbush  v.  Leonard,  229. 
Quinby  v.  Merritt,  49. 
Quinn  v.  Fuller,  174. 

V.  Hard,  177. 
Quirk  V.  Thomas,  277. 


R 


Rabbermau  v.  Muehlhausen.  8. 

Raborg  v.  Pej'ton,  87. 

Ramchuru  v.  Radakissen,  34G. 

Ramuz  v.  Crowe,  322. 

Rand  v.  Dovey,  114. 

Ranger  v.  Cary,  47,  328,  330. 

Ransom  v.  Mack,  3G4. 

Rapelye  v.  Anderson,  172,  231. 

Raplee  v.  Morgan,  171. 

Ratcliff  V.  Planters'  Bank,  33G,  340. 

Raubitschek  v.  Bank,  7. 

Rawdon  v.  Redfield,  368. 

Rea  V.  Dorrance,  373. 

Read  v.  Bank  of  Kentucky,  352. 

V.  Cutts,  109. 

V.  McNulty,  56. 

V.  Wilkinson,  86. 
Reed  v.  Batchelder,  209. 

V.  Prentiss,   266. 

V.  Roark,  58. 

V.  Wilson,  79,  333. 
Reeder  v.  Nay,  20. 
Rees  V.  Overbaugh,  235. 
Redlich  v.  Doll,  251,  252. 
Redman  v.  Adams,  43. 
Reg.  v.  Bartlett,  63. 

V.  Harper,  60. 
Reid    V.    Furnival,    129. 

V.  Morrison,  340. 
Reinicker  v.  Smith,  223. 
Remer  v.  Downer,  357. 
Remsen  v.  Graves,  164,  165. 
Renick  v.  Robbins.  360. 
Requa  v.  Collins,  368. 
Rex  V.  Bigg,  108. 

V.  Hunter,  02. 

V.  Lambton,  72. 

V.  Randall.  63. 

V.   Thorn.  68. 

V.  Treble,  238. 

V.  Wilcox,  49. 
Rey  V.  Simpson.  140. 
Reynolds  v.  Appleman,  355. 

V.  Dechaums,   223. 

V.  Douglass,  378. 

V.  Peto,  93. 

V.  Ward,  20. 
Rhea  v.  Allison.  296. 
Rhett  V.  Poe,  392. 
Rhine  v.  Robinson,  71. 


CASES    CITED. 


431 


[The  figui-es  refer  to  pages.] 


Rhodes  V.  Gent,  347. 

V.  Lindley,  49. 
Rice  V.  Grauge,  293. 
V.  Hogan,  347. 
V.  Mather,  233. 
V.  Peet,  220. 
V.  Stearns.  118.  119. 
Rich  V.  Starbuck,  02. 
Richards,  In  re,  72. 
V.  Barlow,  6. 
V.  Betzer,  206. 
V.  Darst,  133. 
V.  Frankum,  108. 
V.  Griggs.  10. 
V.  Warring,  8. 
Richardson  v.  Carpenter,  42. 
V.  Lincoln,   118. 
V.  Martyr,  37. 

V.  Massachusetts    Charitable    Me- 
chanic Ass'n,  213. 
Richmond  v.  Diefeudorf,  3U8. 
Rickford  v.  Ridge.  332. 
Rickle  V.  Dow.  111. 
Riddle  v.  Mandeville,  172. 
Riggs  V.  American  Tract  Soc.  220. 
V.  Hatch,  3G7. 
V.  Lindsay,  82. 
Riley  v.  Shawacker,  310. 
Ripley  v.  Grant,  218. 
V.  Greenleaf,  79. 
Risley  v.  Smith,  42. 
Rivanna  Nav.  Co.  v.  Dawsnns,  213. 
Riverside  Iron-AVorks  v.  Hall,  20. 
Roark  V.  Turner,  171,  232. 
Robarts  v.  Tucker,  403. 
Robbins  v.  Bacon,  7. 
Roberts  v.  Corbin,  384,  394. 
V.  Jackson,  71. 
V.  Snow,  48. 
Robertson  v.  Allen,  1G4. 

V.  Kensington,  120,   122,  305. 
Robinson  v.  Ames.  40,  324,  327. 
V.  Brown,  15,   137,   193. 
V.  Crandall.  185. 
V.  Hawksford,  389,  390. 
V.  Wilkinson,  15. 
V.  Yarrow,  315. 
Rock  V.  Nichols,  206. 
Rock  Island  Nat.  Bank  v.  Nelson,  31S 
Rockwell  V.  Charles,  224. 
V.  Elkhorn  Bank,  213. 


Roehner   v.   Knickerbocker  Life  Ins. 

Co..  79. 
Rogers  v.  Adams,  255. 

V.  Blackwell.   217. 

V.  Morton,  183. 

V.  Shaw,  234. 

V.  Walker.  218. 
Rogerson  v.  Ladbroke,  404. 
Rolin  V.  Steward,  403. 
Roll  V.  Raguet,  274. 
Rosa  V.  Brotherson,  296. 
Rose  V.   Sims,  258. 
Rosher  v.  Kieran,  358. 
Ross  V.  Bedell.  317. 

V.  Hurd,  378. 

V.  Milne,  83. 

V.  Planters'   Bank,   356. 
Rossman  v.  Townsend,  83. 
Rothschild  V.  Currie,  127,  849,  353. 
Rounds  V,  Smith,  399. 
Rousillon  V.  Rousillon,  275. 
Row  V.  Dawson,  7. 
Rowe  V.  Tipper,  362,  371. 

V.  Young,  336. 
Rowlands  v.  Springett,  358. 
Rubey  v.  Culbertson,  12. 
Rucker  v.  Hiller,  349. 
Ruckman  v.  Bryan,  277. 
Ruddell  V.  Walker,  348. 
Ruff  V.  Webb,  29. 
Ruiz  V.  Rcnauld,  98. 
Kumball  v.  Ball.  327. 
Russell  V.  Ball,  119. 
V.  Langstaffe,  112, 
V.  Phillips,  81. 
V.  Powell,  30. 
V.  Whipple,  16,  33,  34,  71,  134. 


S 


Safford  v.  Wyckoff,  214. 

Sager  v.  Tupper,  58. 

St.  John  V.  Homans.  395. 
V.  Roberts,  284. 

St.  Louis,  i.  &  M.  S.  Ry.  Co.  v.  Cam- 
den Bank,  33. 

St.  Louis  Nat.  Stockyards  v.  O'Reilly, 
93. 

St.  Stephen  Branch  Ry.  Co.  v.  Black, 


432 


CASES    CITED. 


[The  Q{?urcs  refer  to  pages.] 


Salter  v.  Burt,  79.  333. 

Saltniarsh  v.  Tutbill,  270. 

Salt  Spriugs  Bank  v.  Burton,  334,  335. 

V.  S}-racuse  Savings  Inst,,  152. 
Saltus  V.  Everett.  252. 
Sanders  v.  Bacon,  120. 
Sanderson  v.  Bowes,  328. 

V.  Keinstadler,  304,  306. 
Sands  v.  Clarke,  340.  373. 

V.  Lj-ou,  333. 
San  ford  v.  Norton,  345. 
Sargent  v.  Appleton,  287. 
Saunderson  v.  Jackson,  59. 

V.  Judge,  338,   307. 
Savage  v.  Aldren,  122. 

V.  King,  190. 
Savannah  Nat.  Bank  v.  Haskens,  114. 
Sawyer  v.  Chambers,  121,  205. 

V.  McLouth,  259. 

V.  Warner,  313. 
Say  V.  Barwick,  223. 
Sayles  v.  Smith,  270. 
Scaife  v.  Byrd.  71. 
Schepp  V.  Carpenter.  177,  298. 
Schermerhorn  v.  Talman,  53. 
Schmittler  v.  Simon,  43. 
Schofleld  V.  Bayard,  150,  1.52.  375. 
Scholefield  v.  Eichelbeiger.  374. 
Schoonmaker  v.  Roosa.  203. 
Scliroeder  v.  Central  Bank.  395. 
Schuler  v.  Israel  Bank,  404. 
Schwalm  v.  Mclntyre,  240. 
Schwenk  v.   Yost,   108. 
Scofield  V.  Day,  109. 
Scotland  Co.  v.  Hill,  310. 
Scott  V.  Bevan,  53. 

V.  Lloyd,  220. 

V.  Lufford.  371. 

V.  Pllklngton,  101. 

V.  Schreeve,  13. 
Scudder  v.  Union  Nat.  Bank.  93,  101, 
Seabury  v.  Hungerford,  113,  130. 
Seacord  v.  Miller,  379. 
Seaman  v.  Whitney,  83. 
Searcy  v.  Vance,  50. 
Sears  v.  Lantz,  109. 
Scaton  V.    Scovill,  370. 
Seaver  v.  Lincoln,  344. 

V.  Phelps.  210,  217. 
Second  Nat.  Bank  v.  Williams,  395. 
Sedgwick  v.  Stanton,  274, 
Seeley  v.  Engell,  200 


Selby  v.  McCullough,  20. 

v.  Selby,  58. 
Seligman  v.  Ten  Eyek's  Estate,  13. 
SeLser  v.  Brock,  104,  290. 
Semraes  v.  Wilson,  171. 
Seneca  Co.  Bank  v.  Neass,  178,  179. 
Sentance  v.  Poole,  210,  217. 
Senter  v.  Continental  Bank,  394. 
Sergeson  v.  Sealey,  218. 
Serle  v.  Norton,  389. 
Seventh  Nat.  Bank  v.  Cook,  402. 
Sewall  v.  Russell,  300,  370. 
Seybel    v.    National    Currency    Bank. 

3(t3. 
Seymour  v.  Cowing,  72,  74. 

V.  Mickey,  113. 
Shackelford  v.  Hooker,  84,  83. 
Shade  v.  Creviston,  190. 
Shadwell  v.  Shadwell,  203. 
Shank  v.  Butsch,  58,  382. 
Shaver  v.  Ehle,  101. 
Shaw  V.  Clark,  310. 

V.  Knox,  174. 

V.  Railroad  Co.,  29. 

V.  Smith.  03. 
Shaylor  v.  Mix,  305,  366. 
ShcHl  V.  Brett,  344,  300. 
SJieJburne  Falls  Nat.  Bank  v.  Towns- 
ley  304,  305,  370. 
Shelby  v.  Judd,  109. 
Sheldon  v.  Benham,  305,  370. 

V.  Horton,  378. 
Shelhy  v.  Manderville,  22. 
Shelton  v.  Braithwaite,  358. 
Shenton  v.  James,  38,  45. 
Shepard  v.  Hall,  304. 
Shepherd  v.  Chamberlain,  334. 
Sheridan  v.  Mayor,  etc.,  11. 
Sherman  v.  Blackman,  233. 
Shinn  v.  Fredericks.  8. 
Shipley  v.  Carroll,  251. 
Shisler  v.  Vandike,  243. 
Shoemaker  v.  Mechanics'  Bank.  300. 
Shoenberger   v.  Lancaster    Sav.   Ins., 

377. 
Sliotwell  V.  Webb,  13. 
Shoultcrs  V.  Allen.  217. 
Shrieve  v.  Duckham,  3.59. 
Shultz  V.  Depuy,  310. 
Shuttleworth  v.  Stephens,  61. 
Shutts  V.  Fingar,  47,  287,  288,  329. 
Sice  V.  Cunningham,  328,  331. 


CASES    CITED. 


433 


[The  figures  refer  to  pages.] 


Siebeneck  v.  Anchor  Sav.  Bank,  2SS. 
Siebold  v.  Davis,  82. 
Sigourney  v.  Lloyd,  123. 
Simpson  v.  Davis,  6,  260. 

V.  Del  Hoyo,  241). 

V.  Hall,  202. 

V.  Moulden,  50. 

V.  Pacific  Mut.  Life  Ins.  Co.,  400. 

V.  Stackhouse,  241. 

V.  Turney,  370. 
Sims  V.  Smith,  209, 
Sinclair  v.  Baggaley,  271. 

V.  Lynah,  358. 
Skelton  v.  Dustin,  335. 
Skillman  v.  Titus,  393. 
Sloan  V.  McCarty,  36,  3S. 
Slocumb  V.  Holmes,  23. 
Small  V.  Smith,  178. 
Smallwood  v.  Vernon,  129. 
Smedes  v.  Utica  Bank,  364. 
Smentek  v.  Coonhauser,  36. 
Smilie  v.  Stevens,  36. 
Smith,  V.  Abbott.  85. 

V.  Allen,  33.  34. 

V.  Boheme,  35,  49. 

""..  Boulton,  358. 

V.  Braiue,  318. 

V.  Brittain,  10. 

v.  Chester,  20,  145,  184. 

V.  Clarke,  113,  117,  197. 

V.  De  Witts,  292. 

V.  Eureka  Flour  Mills,  213. 

V.  Ewer,  10. 

V.  Finch,  131. 

V.  Hawkins,  290. 

V.  Hiscock,  203,  267. 

V.  Johnson,  215. 

V.  Kendall,  5,  56. 

V.  Knox,  176. 

V.  Livingston,  249,  318,  319. 

V.  Livingstone,  184. 

V.  McChire,  91. 

V.  Marsack,  146,  311. 

V.  Miller,  327,  346,  391. 

V.  Moberly,  252. 

V.  Mullett,  3G6,  371. 

V.  Nightingale,  55. 

v.  Philbrick,  75. 

V.  Roach,  326. 

V.  Sac  Co.,  318. 

V.  Sawyer,  150. 

V.  Shaw,   53. 

NEG.  BILLS 28 


Smith  V.  Sheppard,  242. 

V.  Smith,  258. 

V.  Whiting,  357. 

V.  Wilcox,  270. 

V.  Williamson,  223. 
Smithers  v.  Junker,  39. 
Suirts  V.  Overjohn,  254. 
Suow   V.   Perkins,  356. 
Snyder  v.  Studebaker,  215. 
Scares  v.  Glyn,  122. 
Sohn  V.  Morton,  290. 
Solarte  v.  Palmer,  354,  358. 
Solomons  v.  Bank  of  England,  203. 
Southall  V.  Rigg,  258. 
Southard  v.  Porter,  196. 

V.  Wilson.  187. 
Southern  Masonic  Relief  Tier  Ass'n  v. 

Laudenbach,  219. 
Southwick  V.  First  Nat.  Bank  of  Mem- 
phis, 249. 

V.  Sax,  346. 
Sparrow  v.  Chisman,  175. 
Spaulding  v.  Andrews,  94,  99. 

V.  Putnam,   109. 
Spear  v.  Crawford,  213. 

V.  Pratt,  92. 
Speck  V.  Pullman  Car  Co.,  202. 
Spencer  v.  Allerton,  131. 

V.  Ballon,  177,  298,  362,  363. 

V.  Carstarphen,  133. 

V.  Harvey,  377,  379. 

V.  Tilden,  227. 
Sperry  v.  Horr,  56. 
Spies  V.  Gilmore,  131,  375. 
Spinning  v.  Sullivan,  190. 
Spitler  V.  James,  304. 
Spooner  v.  Holmes,  12,  304» 
Sprague  v.  Duel,  219. 

V.  Sprague,  260. 
Springer  v.  Hutchinson,  130. 
Sproat  V.  aiatthews,  43,  93. 
Spurgin  v.  McPheeters,  30,  43. 
Stackpole  v.  Arnold,  68. 
Stafford  v.  Yates,  362.  363. 
Stainback  v.  Bank  of  Virginia,  344. 
Stalker  v.  McDonald,  295. 
Stam  V.  Kerr,  349. 
Stanton  v.  Allen,  275. 

V.  Blossom,  360,  363. 
Staples  V.  Franklin  Bank,  334. 
State  V.  Cilley,  240. 

V.  Corpen'ng,  50. 


434 


CASES    CITED. 


[The  figures  refer  to  paj:os.] 


State  V.  Kice,  213. 

State  Bank  v.  Huid,  339. 

V.  McCoy,  2T1. 
State  Capital  Bauk  v.  Thompson,  271, 

272. 
State  Mut.  Fire  Ins.  Co.  v.  Roberts,  13. 
Steele  v.  McKinlay,  SS,  140. 
Stein  V.  Yglosias,  17G,  204. 
Steman  v.  Harrison,  98,  99. 
Stephens  v.  Graham,  236.  238. 

V.  Monongahela  Nat.  Bank,  175. 
Sterling  v.  Marietta  &,  S.  Trading  Co.. 

290. 
Sterry  v.  Robinson,  326. 
Stevens  v.  Bruce,  330. 

V.  Oaks,  288. 

V.  Park,  389. 
Stevenson  v.  Hyland,  295. 

V.  O'Neal,  118. 
Stewart  v.  Eden,  75. 

V,  Fullarton.  39. 

V.  Insall.  2G<). 

V.  Kennett,  300. 

V.  Lansing,  249. 

V.  Lispenard,  219. 

V.  Millard,  348. 

V.  Petree,  229. 

V.  Smith,  389,  391. 
Stix  V.  Mathews,  371. 
;>tocken  v.  Collins,  358. 
Stocks  V.  Dobson,  11. 
Stock  well  V.  Bramble.  93. 
Stoddard  v.  Kimball,  178. 
Stoessiger  v.  South  E.  Ry.  Co.,  60. 
Stone  v.  Clough,  322, 

V.  Frost,  11. 

V.  Peake,  265. 

V.  Rawlinson,  194. 
Storer  v.  Logan,  86,  96. 
Storm  v.  Stirling,  62. 
Story  V.  Lamb,  8. 
Stover  v.  Logan,  99. 
Strange  v.  Price,  359. 
Stratton  v.  Hill,  172. 
Strong  V.  King,  46,  334,  346. 

V.  Tompkins,  187. 
Stnithers  v.  Kendall,  295. 
Stults  V.  Silva.  36,  40. 
Sturdy  v.  Henderson,  328. 
Sturges  V.  Fourth  Nat.  Bank,  83,  93. 

101. 
Sturtevant  v.  Ford,  176,  204.  . 


Sudler  v.  Collins,  238. 

Suffolk  Sav.  Bauk  v.  City  of  Boston, 

310. 
Sullivan  v.  Laugley,  249,  319. 
Sun  Printing  &  Pub.  Ass'n  v.  Ti'ibune 

Ass'n,  270. 
Supervisors  v.  Schenck,  215. 
Suse  V.  Pomp,  326. 
Susquehanna  Valley  Bank  v.  Loomis, 

171. 
Sussex  Bank  v.  Baldwin,  337,  340,  342. 
Sutton  V.  Toomer,  239,  328. 
Suydam  v.  Westfall,  174,  227,  281. 
Swasey  v.  Vanderheyden,  208. 
Swaj-ze  v.  Britton,  351,  300. 
Sweet  V.  Chapman,  231,  293. 
Sweetser  v.  French,  113. 
Swift  V.  Tyson,  294. 
Swinj'ard  v.  Bowes,  163. 
Swope  V.  Leffingwell,  281. 

V.  Ross,  81,  84,  281. 
Sylvester  v.  Crapo,  331. 
V.  Downer,  136. 


T 


Taft  V.  Sergeant,  209. 

Talbot  V.  Bank  of  Rochester.  245. 

V.  Clark,  370. 
Tappan  v.  Ely,  120. 
Tardeveau  v.  Smith's  Ex're,  227. 
Tardy  v.  Boyd,  375. 
Tassell  v.  Lewis,  332. 
Tassey  v.  Church,  44. 
Tatum  V,  Kelley,  278. 
Taunton  Bank  v.  Richardson,  378. 
Taylor  v.  Atchison,  224. 

V.  Binney,  130. 

V.  Croker.  146. 

V.  Dobbins,  59. 

V.  Drake,  101. 

V.  French,  140. 

V.  Snyder,  75,  339,  378. 

V.  Steele,  32,  33. 
Temple  v.  Baker,  109. 
Teuney  v.  Prince,  113. 
Terry  v.  Parker,  327,  372. 
Tevis  V.  Young,  60. 
Texas  L.  &  T.  Co.  v.  C^itoII,  6a 
Thacher  v.  Dinsmore,  183. 

V.  Pray,  295. 


CASES    CITED. 


435 


[The  figures  refer  to  pages.] 


Thacher  v.  Stevens,  137. 

Tliackray  v.  Blackett,  374. 

Thatcher   v.   West   River   Nat.   Bank, 

174,  175. 
Thomas  v.  Railroad  Co.,  213. 

V.  Roosa,  51. 

V.  Shoemaker,  78. 

V.  Tliomas,  1S2. 
Thompson  v.  Clubley,  175. 

V.  Gumming,  320. 

V.  Ketcham,  3o'J. 

y.  Shepherd,  174. 

V.  Sloan,  51,  53. 

V.  Waters,  213. 

V.  Whitmarsh.  G7. 

V.  Williams,  355,  364. 
Thomson  v.  Lee  Co.,  198. 
Thorn  v.  Bell,  243. 

V,  Rice,  366. 
Thornburg  v.  Emmons,  323. 
Thornton  v.   Dick,  'JO. 
Thorpe  v.  Booth,  328. 

V.  Peck,  334. 
Thurmau  v.  Van  Brunt.   76. 
Thurston  v.  Cornell,  228. 

V.  M'Kown,  330. 
Tibbets  v.  Gerrish,  10. 
Ticonie  Bank  v.  Smiley,  167. 
Ticonic  Bank  v.  Stackpole,  351. 
Tidmarsh  v.  Grover,  238. 
Tiernan  v.  Jackson,  81. 

V.  AVoodruff,  288. 
Tillman  v.  Wheeler,  138. 
Timms  v.  Shannon,  13. 
Tindal  v.  Brown,  354.  361,  363,  369. 
Tinker  v.  M'Cauley,  109. 
Titcomb  v.  Thomas,  131. 

V.  Vantyle,  220. 
Tittle  V.  Thomas,  62. 
Tobey  v.  Barber,   346. 

V.  Lennig,  356. 
Toby  V.  Maurian,  377. 
Tool  Co.  V.  Norris.  274. 
Towne  v.  Rice,  224,  313. 
Town  of  Solon  v.  Williamsburgh  Sav. 

Bank.  251. 
Town  of  Thompson  v.  Perrine,  198. 
Towusend  v.  Bush,  230. 
V.  Derby,  6,  77. 
V.  Lorain  Bank,  350,  359. 
Townsloy  v.  Sumrall.  101,  102,  392. 
Tracy  v.  Talmage,  278. 


Traders'  Bank  v.  Bradner,  298. 

Trammell  v.  Hudmon,  169. 

Trent  Tile  Co.  v.   Ft.  Dearborn    Nat. 

Bank  of  Chicago,  81. 
Treuttel  v.  Baraudon,  123,  124,  305. 
Trickey  v.    Larne,   263. 
Trieber  v.  Commercial  Bank,  271,  272. 
Triggs  V.  Newuham,  334. 
Trimbey  v.  Vignier,  111,  112,  197. 
Triplett  v.  Hunt,  363. 
Tripp  V.   Curtenius,  29. 
Trotter  v.  Curtis,  228. 
Trow  V.  Glen  Cove  Starch  Co.,  242, 
Troy  City  Bank  v.  Lanman,  86,  339. 
True  v.  Collins,  367. 
Trueman  v.  Fenton.  258. 

V.  Hurst,  210. 
Trust  Co.  V.  National  Bank,  130,  196. 
Trustees  of  Union  College  v.  Wheeler, 

12. 
Tryon  v.  Oxley,  68. 
Tunno  v.  League,  374. 
Turnbull  v.  Bowyer,  164,  315. 
Turner  v.  Brown,  232. 

V.  Keller,  164. 

V.  Leech,  362,  370,  375. 

V.  Mead,  331. 

V.  Samson,  373. 

V.  Stones,  327. 

V.  Treadway,  296. 
Tuttle  V.  Bartholomew,  109. 

V.  Catlin,  83. 

V.  Standish,   322. 
Tye  V.  Gwynne,  263. 
Tyler  v.  Carlisle,  277. 

V.  Gardiner,   254. 

V.  Gould,  81,  395. 

V.  Young,  202. 
Tyson  v.  Rickard,  226. 


u 


Ulster  County  Bank  v.  McFarlan,  100. 
Underbill  v.  Phillips,  77. 
Union  Bank  v.  Fowlkes,  336. 

V.  Hyde,  26,  326,  351,  392. 

V.  Middlebrook,  243. 
Union  Foundry  &  P.  C.  W.  Works  v. 

New  York  L.  D.  Co.,  265. 
Union  Nat.  Bank  v.  Hunt,  216. 

V.  Oceana  Co.  Bank,  394. 


43(i 


CASES    CITED. 


[The  figures  refer  to  pnjjos.l 


Upham  V.  Prince,   110. 
U.  S.  V.  Gi'ossniayer.  374. 

V.  National  Paik  Bank,  244. 

V.  \N'liile,   10.   rJ5. 


Valentine  v.  Lunt,  249. 

Valle  V.  Cerre.  100. 

Vallett  V.  Parker.  225,  252,  2G7.  209. 

Vanbibber  v.  Louisiana  Bank,  402. 

Van  Brunt  v.  Eoff,  234. 

Van  Buskirk  v.  Insui-ance  Co.,  10. 

Vance  v.  Collins,  306. 

Van  Deusen  v.  Sweet,  216,  218. 

Vandewall  v.  T^-rrell,  150. 

Van  Duzer  v.  Howe,  174,  228,  241. 

\an  Heath  v.  Turner,  2. 

Van  Keuren  v.  Corkins,  11. 

Vanliew  v.  Second  Nat.  Bank,  184. 

Van  Patten  v.  Beals,  217. 

^'an  Schaack  v.  Stafford,  231. 

Van  Staphorst  v.  Pearce,  92. 

Van  Vechten  v.  Pryn,  306. 

Van  Wagner  v.  Terrett.  31. 

Van  Wart  v.  Woolley,  82. 

Vanwickle  v.  Downing,  348. 

^'anzant  v.  Arnold,  110. 

Vathir  v.  Zane,  183. 

Veach  v.  Thompson,  255. 

Veeder  v.  Mudgett,  216. 

Verbeck  v.  Scott,  310. 

Vere  v.  Lewis,  382. 

Vincent  v.  Horlock,  114. 

Vinton  v.  King,  201. 

V.  Peck,  70,  270. 
Vogle  V.  Ripper,  242. 
Voorhees  v.  Voorhees,  254.    • 
Vosburgh  v.  Diefendorf,  249,  308,  319 
Vyse  V.  Clarke,  00. 

V.  Wakefield,  130. 


W 

Wackerbarth,  Ex  parte,  104,  152. 
Wadlington  v.  Covert,  40. 
Wadsworth  v.  Sharpsteen,  219. 
Wait  V.  Pomeroy.  241. 
Wakefield  v.  Greenhood,  101. 
Walker  v.  Atwood,  85. 

V.  Bank  of  Missouri,  365. 


Walker  v.  Bank  of  State  of  New  York, 
88. 

V.  Clay,  313. 

V.  Macdonald,  113,  117. 

V.  Roberts,  39,  47. 

V.  Stetson,  154,  325,  327. 

V.  Turner.   351. 

V.  Woollen,  40. 
Wall  V.  Hill,  220. 
Wallace. V.  Agry,  46,  324,  330,  346, 

V.  Crilley,  334. 

V.  Hardacre.  194. 

V.  McConnell,  81. 
Walmsley  v.  Child.  4. 
Walrad  v.  Petrie.  59. 
Walsh  V.  Dart,  47,  335. 

V.  Lennon,  21. 
Walter  v.  Haynes,  367. 

V.  Ku-k,  118. 
Walters  v.  Brown,  306. 
Walton  V.  Hastings,  236. 

V.  Mascall,  130. 
Walwyn  v.  St.  Quintiu,  373. 
V\\alz  V.  Alback,  140. 
Ward  V.  Allen,  92. 

V.  Churn,  70. 

V.  Howard,  297. 

Y.  Perrin,  308. 

V.  Sugg,  230. 
Warden  v.  Howell,  178. 
Wardens  &  Vestrymen  of  St.  James- 
Church  V.  Moore,  142. 
Warder  v.  Gibbs.  174. 

V.  Tucker,  128.  373. 
Warder,   Bushnell   &   Glessner   Co.   v. 

Gibbs,  194. 
Waring  v.  Smyth.  235. 
Warner  v.  Whittaker,  13,  190. 
Warren  v.  Gilman,  359,  366. 

V.  Hodge,  21. 
Warrington  t.  Early,  239. 
Washington  Bank  v.  Lewis,  295. 
Washington  Co.  Mut.  Ins.  Co.  v.  Mil- 
ler, 48. 
\^'aterman  v.  Vose,  239. 
Watervliet   Bank  v.    White,  114,  116,. 

117. 
Watkins  v.  Crouch,  341. 

V.  Maule,  195,  196. 
Watrous  v.  Halbrook,  62. 
Watson  V.  Evans,  64. 
V.  Loring,  820. 
V.  New  England  Bank,  180. 


CASES    CITED. 


437 


[The  figures  refer  to  pages.] 


Watson  V.  Randall,  29S. 

V.  Kussell,  2G0. 
Watt  V.  Riddle,  1G9. 
Way  V.  Richardson,  12. 

V.  Smith,  30. 
Wayland  University  v.  Boorman,  213. 
Wayne  Agricultural  Co.  v.  Cai'dwell, 

290. 
Weaver  v.  Barden,  292,  296,  309. 
Webb  V.  Morgan,  188. 
Webster  v.  Calden,  314. 

V.  Cobb,  113. 
Weckler  v.  First  Nat.  Bank,  213. 
Wegersloft'e  v.  Keene,  84,  347. 
Weidler  v.  Kauffman,  10. 
Weil,  Succession  of,  164. 
Weinstock  v.  Belhvood,  394. 
Welch  V.  Allington,  21. 

V.  Carter,  2GG. 

V.  Goodwin,  244. 

V.  Lindo,  118. 

V.  Sage,  304. 
Weldon  v.  Buck,  157,  158,  326. 
Welford  v.  Beazely,  59. 
Wellington  v.  Jackson,  58. 
Wells  V.  Brighani,  1,  7,  83. 

V.  Hopkins,  265. 

V.  Schoonover,  12. 

V.  Whitehead,  27. 
Wentworth  v.  Clap,  79. 
West  V.  Brown,  370. 

V.  Russell,  219. 
West  Boston  Sav.  Bank  v.  Thompson, 
.     282. 

Westerfield  v.  Jackson,  220. 
Western  Cottage  Organ   Co.   v.    Red- 
dish, 213. 
West  River  Bank  v.  Taylor,  361,  363. 
Wethey  v.  Andrews,  328. 
Whaley  v.  Houston,  345. 
Wheatley  v.  Strobe,  30. 
Wheeler  v.  Barret,   202. 

V.  Field,  340,  376. 

V.  Guild,  280. 
Wheelock  v.  Freeman,  241. 
Whistler  v.  Forster,  106,  384,  386. 
Whitaker  v.    Bank   of   England,  403, 

405. 
Whitbeck  v.  Van  Ness,  21. 
White,  Ex  parte,  240. 

V.  Continental     Nat     Bank,     148, 
149.  244. 


White  V.  Haas.  238. 

V.  Hoyt,  31. 

V.  Kuutz,  273. 

V.  Miners'  Nat.   Bank,  123. 

V.  Stoddard,  332. 
Whitefield  v.  Savage,  378. 
Whitehead  v.  Walker,  326. 
Whitehouse  v.  Hanson,  140. 
Whitmer  v.  Frye,  239. 
Whitney  v.  Dutch,  209. 

V.  National  Bank  of  Potsdam,  161. 
Whittaker  v.  Edmunds,  317. 

V.  Howe,  276. 
Whitten  v.  Hayden,  317. 
Whittier  v.  Graffam,  340. 
Whitwell  V.  Winslow,  15. 
Wickes  V.  Caulk,  235. 
Wiffen  V.  Roberts,  172,  228,  335. 
Wiggin  V,  Bush,  224. 
Wigglesworth  v.  Steers,  222. 
Wilde  v.  Sheridan,  90. 
Wilders  v.  Stevens,  133. 
Wilkie  V.  Roosevelt,  232, 
Wilkinson  v.  Adam,  357. 

V.  Johnson,  143,  152. 

V.  Lutwidge,  143. 
Willcox  V.  Jackson,  223. 
Willets  V.  Phoenix  Bank,  382,  386,  397, 

398. 
Williams  v.  Bank  of  U.  S.,  366,  368, 
391,  392. 

V.  Cameron,  218. 

v.  Gait,  72. 

V.  Germaine,  103,  150,  151. 

V.  Matthews,  202. 

V.  Potter,  123. 

V.  Smith,  298,  299,  332. 

V.  Teshomingo  Sav.   Inst.,  164. 

V.  Waring,  336. 

V.  Williams,  3. 

V.  Winans,  101. 
Williamson  v.  Brown,  302. 

V.  Watts,  208,  210. 
Willis  V.  Green,  360. 

V.  Sharp,  67. 

V.  Trarably.    190. 
Willmarth  v.  Crawford,  269. 
Willoughby  v.  Comstock,  45. 
Willoughby's  Case,  30. 
Willse  v.  Whitaker,  122. 
Wilmarth  v.  Crawford,  172. 
Wilson  V.  Clements,  101. 


43S 


CASES    CITED. 


[The  figures  refer  to  p;i;;os.] 


Wilson  V.  EllswotJ-li,  183. 
V.  Lazier,  317. 
V.  Msbet,  -ll'l,  311. 
V.  Kocke,  31'J. 
V.  Swabey,  3(33. 
Wilson   Sewing-Mach.   Co.   v.   Spears, 

12. 
Wilton  V.  Eaton,  25S. 
Winberry  v.  Koonee,  10. 
Wiuchell  V.  Carey,  271. 
Windham  Bank  v.  Norton,  375. 
Wing,  In  re,  218. 
V.  Terry,   157. 
Winsted  Bank  v.  Webb,  230. 
Winter  v.  Drui-y,  81- 

V.  Livingston,  203. 
Wintermute  v.  Post,  S6. 
Wisdom  V.  Becker,  OS. 
Wise  V.  Charlton,  44,  HI. 
Wiseman  v.  Chiapella,  ."kJG. 
Wolcott   V.    Van    Santvourd,    81,    141, 

238,  348. 
Wolfe  V.  Jewett  336. 
Wolford  V.  Andrews,  350. 
Wood  V.  Corl.  78. 
V.  McKean.  202. 

V.  Maj-or,  etc.,  of  New  York,  190. 
V.  Mullen,  324. 
V.  Pugh,  152. 
V.  Steele,  234,  237. 
V.  Watson,  35G. 
Woodbury  v.  Woodbury.  131. 
Woodcock  V.  Bennett,  349. 
Woodford  V.  Dorwin,  70. 
Woodhull  V.  Holmes,  177. 
Woodin  V.  Foster,  3;i8,  354,  303,  304. 
Woodland  v.  Fear,  404. 
Woodman  v.  Thurston.  377. 
Woodruff  V.  Merchants'  Bank,  47,  382, 

385. 
Woods  V.  Armstrong,  225. 

V.  Woods,  23. 
Woodthorpe  v.  Lawes,  354,  358. 
Woodward  v.  Rowe,  2. 


Woodworth  v.  Bank  of  America,  238, 
.34L 

V.  Huntoon,  132,  309.  310. 
Wooley  V.  Lyon,  114,  3G7. 
Worcester  Bank  v.  Wells,  98. 
Worcester  Co.  Bank  v.  Dorchester  & 

Milton  Bank,  70,  304. 
Worden  v.   Dodge,  42. 
Workman  v.  Wright,  243. 
Works  V.  liershey,  40,  45. 
Woi-mley  v.  Lowry,  296. 
\\'()rrall  v.  Munn.  72. 
Worth  V.  Case,  73,  203. 
Wright  V.  Crabbs,  277. 

V.  Irwin,  183,  317. 

V.  Pipe  Line  Co..  210. 
Wyld,  Ex  parte,  151. 
Wynne  v.  Raikes,  99. 


Yates,  Ex  parte,  108. 

Yeaton  v.  Bank  of  Alexandria,  173. 

Yingling  v.   Kohlhass,   15. 

York  Co.  M.  F.  Ins.  Co.  v.  Brooks,  164. 

Young  V.  Adams,  50. 

V.  Bryan,  20.   392. 

V.  Glover.    108. 

V.  Grote,   148,  238,  251. 

V.  Hill,  229. 

V.  Hockley,  174. 

V.  Lehman,   244. 

V.  Stevens,  220,  221. 
Youngs  V.  Lee,  297. 


Z 


Zabriskie  v.  Railroad  Co.,  190. 
Zalbriskie  v.   Cleveland,   C.   &   C.    R. 

Co.,  104. 
Zeller  v.  German  Sav.  Inst,  394. 
Zimmerman  v.  Anderson,  54. 


INDEX. 


[the  figures  refer  to  pages.] 


A 

A.CCEPTANCB, 
defined,  26,  80. 
effect,  81. 

classification  of  acceptances,  82. 
may  be  express,  constructive,  oral,  or  written,  83. 
in  what  name,  83. 
while  bill  is  incomplete,  83. 
must  be  according  to  tenor  of  bill,  82.  S3. 
immaterial  departures  from  tenor  of  bill,  83,  85. 
qualified  acceptance,  S3,  8G. 
conditional  acceptance,  83,  86. 
who  may  accept,  83,  87,  102. 
necessity  for  delivery  by  acceptor.  89. 

forms  and  varieties  of,  as  verbal,  written,  and  Implied  from  conduct,  91. 
evidence  of,  91,  92. 
written  acceptance,  91,  92. 
verbal  or  parol  acceptance,  91,  93,  100. 
Implied  from  conduct,  91,  95. 

detention  of  bill,  95. 

destruction  of  bill,  95. 
on  separate  paper,  9G. 
promise  to  accept,  97. 
parol  promise  to  accept,  100. 
accommodation  acceptor,  see  "Accommodation." 
liability  of  acceptor,  141,  142,  147. 
facts  which  acceptor  is  estopped  to  deny,  or  warranties,  142,  147. 

see  "Estoppel." 
damages  against  acceptor,  107. 
for  honor  or  supra  protest,  102. 

liability  of  acceptor  supra  protest,  149. 

steps  necessary  to  consummate  liability  of,  149. 
presentment  to  drawee  at  maturity,  149. 
protest  on  nonpayment  by  drawee,  149. 

NEG.  BILLS  (439) 


440  INDEX. 

[The  figures  refer  to  paf::os.] 

ACCEPTANCE— Continued. 

presentment  to  acceptor  supra  protest,  149. 
protest  on  nonpayment  by  acceptor  supra  protest,  149. 
notice  on  nonpayment  by  acceptor  supra  protest.  149. 
warranties  by  drawer,  that  drawee  has  capacity  to  accept,  15(i. 

that  drawee  will  accept,  156. 
of  check,  395. 

ACCEPTOR, 

of  biU,  defined,  25. 
relation  to  bill,  81. 
liability  of,  141,   142,   147. 

see  "Acceptance." 
facts  which  he  is  estopped  to  deny,  or  warranties,  142,  147. 

see  "Estoppel." 
capacity  of,  warranty  by,  or  estoppel  of  indorser,  159. 
damages  against,  1G7. 

accommodation  acceptor,  see  "Accommodation." 
supra  protest,  liability  of,  149. 

steps  necessary  to  consummate  liability  of,  149. 
presentment  to  drawee  at  maturity,  149. 
protest  on  nonpayment  by  drawee,  149. 
presentment  to  acceptor  supra  protest,  149. 
protest  on  nonpayment  by  acceptor  supra  protest,  149. 
notice  on  nonpayment  by  acceptor  supra  protest,  149. 

ACCOMMODATION, 

accommodation  party  defined,  173. 

liability  of,  173. 
persons  accommodated,  173. 

liability  of,  173. 
aiversion,  177. 
overdue  accommodation  paper,  203. 

ACCORD  AND  SATISFACTION, 
see  "Defenses." 

ACTION, 

who  may  sue,  9-11,  184. 

ADMINISTRATORS, 

see  "Executors  and  Admlnistratorg.* 

AGENTS, 

see  "Principal  and  Agent.** 

ALLONGE, 
defined,  105. 


INDEX.  441 

[The  fignres  refer  to  pages.] 


ALTERATION  OP  INSTRUMENT, 
as  a  defense.  234.  236. 

writing  contract  over  indorsement  in  blanlj,  111,  112. 
warranty  by,  or  estoppel  of,  indorser,  159. 

AMOUNT, 

see  "Bill  of  Exchange";   "Promissory  Note." 

ANTECEDENT  DEBT, 

see  "Purchaser  for  Value  without  Notice." 

ASSIGNMENT, 

assignability  distinguished  from  negotiability,  8. 
whether  writing  an  indorsement  or  assignment,  108. 
of  non-negotiable  instruments,  8-13. 

action  by  assignee,  9. 

notice  of  assignment,  10. 

consideration,  11. 

subject  to  equities  between  prior  parties,  12. 


B 

BANKRUPTCY, 

of  holder,  transfer  by  operation  of  law,  191. 

BILL  OF  EXCHANGE, 
defined,  24. 

foreign  bill,  24. 

inland  bill,  24. 
origin  of  bills,  1. 
parties  defined,  25. 
•form,  25. 

essentials,  in  general,  28. 
indicia  of  negotiability,  13, 

negotiability  not  necessary  to  form  or  substance  of,  !• 
origin  of  negotiability  of,  1. 
date,  74. 

place  of  date,  74. 

necessity  for  and  meaning  of  "value  received,"  76. 
days  of  grace,  77. 
order  contained  In  bill,  28. 

certainty  as  to  terms,  34. 

uncertainty  as  to  event,  34.  37. 

uncertainty  as  to  time,  34,  38. 

payment  out  of  particular  fund,  35.  40. 

additional  condition  or  agreement  not  of  essence   of  order.  35.  43. 


442  INDEX. 

[The  flKures  refer  to  pages.] 

BILL  OF  EXCHANGE— Continued. 

giving  holder  option  between  payment  In  money  or  some  other  thing, 
35,  45. 

payable  on  demand  or  at  sight,  etc.,  35,  45. 

no  time  of  payment  expressed,  35,  47. 

payable  in  Installments,  35,  48. 

must  be  for  payment  of  money  only.  49. 

payment  in  property  other  than  money,  40,  51. 
option  given  holder,  35,  45. 

performance  of  other  acts  in  addition  to  payment  of  money,  49,  53. 

definition  of  money,  50. 

amount  must  be  certain,  49,  55. 
interest,  49,  56. 
exchange,  49,  56. 

payable  in  foreign  money,  52. 
specification  of  parties,  57. 

signature  of  drawer,  57,  58. 

certainty  as  to  parties,  59. 

designation  of  drawee,  57,  61. 

designation  of  payee,  57,  62. 

payable  to  order  of  drawer,  57,  04. 

payable  to  fictitious  person,  57.  (54. 
delivery,  09. 

In  escrow,  69. 
discount  of  bill  by  drawee  before  acceptance,  81. 
relation  of  drawee  to  bill  before  acceptance,  81. 
acceptance,  see  "Acceptance." 
accommodation  parties,  see  "Accommodation." 
payment  by,  18-23. 
nonnegotiable  bill,  7. 
liability  of  drawer,  153. 

warranties  or  facts  which  the  drawer  Is  estopped  to  deny,  156. 
liability  of  acceptor,  141,  142,  147. 

see  "Acceptance." 
facts  which  acceptor  is  estopped  to  deuy,  142,  147. 

see  "Estoppel";   "Warranties." 
liability  of  Indorser,  see  "Indorsement." 

BLANK, 

Indorsement  in  blank,  110. 

Indorsement  written  on  blank  note,  111,  112. 

BONA  FIDE  HOLDER, 

see  "Purchaser  for  Value  without  Notice." 
BURDEN  OF  PROOF, 

as  to  whether  one  is  a  purchaser  for  value  without  notice,  310. 


INDEX.  443 

[The  figures  refer  to  pages.l 

O 

CAPACITY, 

of  parties  to  contract,  66. 

see  "Defenses." 
of  drawer,  estoppel  of  acceptor  to  deny,  142. 
of  drawee  to  accept,  estoppel  of  drawer,  156. 
of  prior  parties,  warranty  by,  or  estoppel  of  indorser,  159. 

CERTAINTY, 

as  to  order  in  bill  or  promise  in  note,  34, 
as  to  amount  to  be  paid,  49. 
as  to  parties,  57. 

CERTIFIED  CHECKS, 
in  general,  395. 

CHECKS, 

defined,  380. 

memorandum  checks,  383. 

drafts  on  bank  in  another  state,  383. 

checks  as  negotiable  instruments,  384. 

presentment,  protest,  and  notice  of  dishonor,  effect  of  delay,  388. 

status  of  stale  check,  388. 

rights  of  holder  against  bank,  394. 

certification  and  acceptance  of  checks,  395. 

failure  of  -bank  to  honor  check,  403. 

payment  by,  18-23. 

CONDITIONAL  ACCEPTANCE, 
In  general,  83,  86. 
see  "Acceptance." 

CONDITIONAL  INDORSEMENT, 
in  general,  117,  119. 
see  "Indorsement" 

CONSIDERATION, 

defined,  sufficiency,  256. 

necessity  for  and  meaning  of  "value  received."  76w 

bill  or  note  imports  a  consideration,  5-7,  76,  260. 

want  or  failure  of,  as  a  defense,  256,  261. 

for  assignment  of  nonnegotiable  instrument,  11. 

megality  of,  223,  267. 

statutory  prohibition,  223,  268. 

violation  of  the  Sunday  laws,  270. 
other  statutes,  272. 
common-law  prohibition,  272. 
contravention  of  public  policy,  273. 


444  INDEX. 

[The  figures  refer  lo  pages.1 

CONSIDERATION— Continued 
in  general,  273. 
restraint  of  trade,  274. 
effect  of  illegality,  276. 

illegality  as  being  total  or  partial,  276. 

knowledge  of  illegality,  Intention,  277. 

accommodation  paper,  see  "Accommodation." 

CONSTRUCTIVE  NOTICE, 
see  "Notice." 

CORPORATIONS, 

ultra  vires  acts,  instruments  executed  by,  66.  211. 
indorsement  and  ti'ansfer  by,  66,  211. 

COVERTURE, 

see  "Married  Women." 

CUSTOM  OF  MERCHANTS, 
defined  and  explained,  2. 

D 

DAMAGES, 

against  acceptor,  maker,  drawer,  and  indorsers,  upon  the  bill  or  note,  and 
upon  the  warranties,  157,  167. 

DATE. 

of  bill  or  note,  74. 

DAYS  OP  GRACE. 

defined,  77. 

DEATH, 

of  holder,  transfer  by  operation  of  law,  191. 

of  joint  payee  or  indorsee,  rights  of  survivor.  191. 

DEFENSES, 

as  against  immediate  party,  and  as  against  purchaser  for  value  without 

notice,  206-291. 
as  real  or  personal.  206. 
real  defenses,  208. 
personal  defenses,  245. 
coverture,  210. 

instruments  executed  by  married  woman,  210. 

indorsement  by  married  woman,  210. 
infancy.  208. 

instruments  executed  by,  208. 

indorsements  by,  208. 
corporations,  ulti*a  vires.  211. 

instruments  executed  by.  211. 


IKDEX.  445 

[The  figures  refer  tc  pages.] 

DEFENSES— Continued. 

indorsements  by,  211. 
persons  non  compos  mentis.  216. 
instruments  executed  by,  216. 
indorsements  bj-,  216. 
drunken  persons,  216. 

instruments  executed  by.  216. 
indorsements  by,  216. 
Instruments  avoided  by  statute,  223. 
usury,  225. 
alterations,  234,  236. 
forgeiy,  234.  241. 

fraud,  duress,  and  undue  infiuenoe,  247. 
want  or  failure  of  consideration,  256,  261. 
illegality  of  consideration,  223.  267. 
statutory  prohibition,  223.  26S. 

violation  of  the  Sunday  laws,  270. 
other  statutes.  272. 
common-law  prohibition,  272. 
contravention  of  public  policy,  273. 
in  general,   273. 
restraint  of  trade.  274. 
effect  of  illegality,  276. 

illegality  as  being  total  or  partial,  276. 
knowledge  of  illegality,  intention,  277. 
discharge  of  instrument  and  of  the  parties  thereto,  279. 
payment,  279,  280. 

discharge  by  operation  of  law,  279,  286. 
.    discharge  by  agreement.  279.  280. 

discharge  of  drawer  or  indorser  by  prejudicial  acts  or  neglect  of  holder. 

279,  287. 
other  methods  of  discharge,  fraud,  diversion,  etc.,  290. 

DEFINITIONS, 

acceptance,  26.  SO. 
acceptor,  25. 

accommodation  parties,  173. 
bill  of  exchange,  24. 

foreign  bill,  24. 

inland  bill,  24. 
custom  of  merchants  or  law  merchant,  2. 
draft,  26. 
drawer,  25. 
drawee,  25. 


446  INDEX. 

[The  figures  refer  to  pages.] 

DEFINITIONS— Continued, 
holder,  of  bill,  2G. 

of  note,  28. 
immediate  parties,  ISl. 
indorsement,    IOj. 
indorser,  of  bill.  2G. 

of  note,  2S. 
indorsee,  of  bill.  2G. 

of  note.  2S. 
maker,  27. 
money,  50. 

promissory  note,  27. 
remote  parties.  181. 
value  received.  76. 

di:livery. 

of  bill  or  note,  69. 
escrow,  09. 
by  acceptor,  89. 
by  indorser,  133. 
transfer  by.  197. 
see  "Transfer." 

DEMAND. 

when  to  be  made,  instrument  payable  on  demand,  45. 

DISCHARGE  OF  INSTRUMENT, 
as  a  defense,  279. 
payment,   279.  2S0. 
by  operation  of  law,  279.  2S6. 
by  agreement,  279.  2S0. 

discbarge  of  drawer  or  indorser  by  prejudicial  act  or  neglect  of  holder. 
279,  2S7. 

DISCOUNT. 

of  bill  by  drawee  before  acceptance,  81. 

DISHONOR. 

see  "Notice  of  Dislionor." 

DIVERSION. 

of  accommodation  paper,  177. 

DRAFT, 

defined,  26. 

DRAWEE, 

of  bill,  defined.  25. 
designation  of.  57.  01. 


INDEX.  44 1 

[The  figures  refer  to  pages.] 

DRAWEE— Continued. 

relation  to  bill  before  acceptance,  SI. 
discount  of  bill  by  drawee  before  acceptance,  81. 
relation  of.  to  bill  after  acceptance,  81. 
existence  of.  estoj)pQl  of  drawer  to  deny,  156. 
capacity  to  accept,  estoppel  of  drawer  to  deny,  158. 

DRAWER, 

of  bill,  defined.  25. 

signature  of.  .57.  58. 

rights  and  liabilities,  before  acceptance,  81. 

after  acceptance,  82. 
liability  of.  153. 

warranties  or  facts  which  the  drawer  is  estopped  to  deny,  156. 
existence  of  drawee.  150. 
capacity  of  drawee  to  accept.  15G. 
that  the  drawee  will  accept,  156. 

discharge  from  liability  by  acts  or  neglect  of  holder,  279,  287. 
existence  of,  estoppel  of  acceptor  to  deny,  142. 
signature  of,  estoppel  of  acceptor  to  deny.  142. 
authority  to  draw,  estoppel  of  acceptor  to  deny,  142. 
capacity  of,  estoppel  of  acceptor  to  deny,  142. 
accommodation  drawer,  see  "Accommodation." 
damages  against,  157.  107. 
capacity  of.  warranty  by,  or  estoppel  of.  iudorser,  159. 

DRUNKENNESS, 
as  a  defense.  216. 

instruments  executed  by  drunken  persons.  216. 
indorsement  and  transfer  by  diunkeu  persons,  216. 

DURESS. 

as  a  defense,  247. 

E 

EQUITABLE   ASSIGNMENT, 
see  "Assignment." 

EQUITY, 

equitable  assignment.  10. 

relief  against  inadvertent  failure  to  indorse,  193. 

EQUITIES, 

title  of  bona  fide  holder  for  value  not  subject  to,  12. 

see  "Defenses." 
assignee  of  nonnegotiable  instrument  takes  subject  to,  12,  190. 

see  "Defenses." 
effect  of  failure  to  indorse.  193. 
transfer  of  overdue  paper  subject  to,  199. 


448  INDEX. 

[The  fi^ires  refer  to  pages.] 

ESCROW. 

delivery  In  escrow,  GO. 

ESTOPPEL. 

facts  which  acceptor  is  estopped  to  deny,  142. 

genuineness  of  drawer's  signature,  142. 

existence  of  drawer,  142. 

capacity  of  drawer,  142. 

authority  to  make  draft,  142. 

competency  of  payee  to  indorse,  142. 

genuineness  of  terms  contained  in  bill,  147. 
facts  which  acceptor  does  not  admit,  147. 

genuineness  of  payee's  or  subsequent  indoi'senients,  147. 
facts  which  the  drawer  is  estopped  to  deny,  156. 

existence  of  drawee,   15G. 

capacity  of  drawee  to  accept,  156. 

that  the  drawee  will  accept,  156. 
facts  which  the  indorseris  estopped  to  deny,  159. 

that  the  bill  or  note  will  be  accepted  and  paid,  159. 

genuineness  of  instrument,  159. 

that  the  instrument  is  a  valid  and  subsisting  obligation,  150 

that  the  obligations  of  all  prior  parties  are  valid,  159. 

capacity  of  prior  parties,  159. 

that  he,  as  indorser,  has  title,  and  the  right  to  transfer,  159i. 

indorser  without  recourse.  166. 

EXCHANGE, 

see  "Damages." 

EXECUTORS  AND  ADMINISTRATORS, 
power  to  transfer  instrument.  GG. 
whether  they  incur  liability,  66. 
transfer  to,  on  death  of  holder,  191. 

EXPENSES, 

see  "Damages." 

P 

FAILURE  OP  CONSIDERATION, 
see  "Consideration." 

FEES, 

notarial  fees,  see  "Damages." 

FEME  COVERT. 

see  "Married  Women." 

FOREIGN  BILL. 

see  "Bill  of  Exchange." 


INDEX.  449 

[The  figures  refer  to  pages.] 

FORGERY. 

as  a  defense.  234.  241. 

estoppel  of,  or  warranty  by,  indorser,  159. 

of  bill  in  respect  of  terms,  acceptor  not  estopped,  147. 

of  indorsements,  estoppel  of  acceptor,  147. 

of  drawer's  signature,  estoppel  of  acceptor,  142. 
FORM, 

of  bill  of  exchange,  25. 

of  promissory  note,  27. 

indicia  of  negotiability,  13. 

see  "Bill  of  Exchange";   "Check";   "Promissory  Note." 

FRAUD. 

as  a  defense,  247. 

FRAUDS,    STATUTE    OF, 

parol  acceptance  or  promise  to  accept,  91,  93,  100. 


a 

GRACE. 

see  "Days  of  Grace." 

GUARANTY, 

whether  writing  an  indorsement  or  guaranty,  109,  129. 

GUARDIANS, 

power  to  transfer  instrument,  GG. 
whether  they  incur  liability,  66. 


HOLDER, 

of  note,  defined.  28. 
of  bill,  defined.  26. 

HONOR. 

acceptance  for  honor,  102. 

HUSBAND  AND  WIFE, 
see  "Married  Women." 


ILLEGAL  AGREEMENTS. 

illegality  as  a  defense.  223.  2Q7. 
see  "Consideration." 

IMPLIED  ACCEPTANCE, 
see  "Acceptance." 

NEG.  BILLS 29 


I 


450  INDEX. 

[The  figures  refer  to  pages.] 

INDICIA, 

of  neijotlabillty.  13. 

see  "Bill  of  Exchange":  '"Promissory  Note.** 

INDORSEE. 

of  bill  or  note,  defined.  26.  28. 

see  "Indorsement";    "Purchaser  for  Value  without  Notice." 

INDORSER. 

of  bill   or  note,  defined.  26.  2S. 

damages  against,  1G7. 

accommodation  indorsor,  see  "Accommodation.'* 

capacity  of,  warranty  by,  or  estoppel  of   subsequent  indorser,  159. 

liability  of.  153,  159. 

see   "Indorsement." 
discharge  of,  by  act  or  neglect  of  holder,  279,  287. 

INDORSEMENT, 
defined.  105. 
formal  requisites,  105. 
indorsement  or  assignment.  108. 
indorsement  or  guaranty,  109.  129. 
in  blank.  110. 

writing  contract  over  indorsement  in  blank,  111. 
indorsement  written  on  blank  bill  or  note,  111,  112. 
in  full.  114. 

instrument  originally  payable  to  bearer,  114. 
combination  of  indorsements  in  full  and  in  blank,  116. 
without  recourse,  117,  118. 
conditional  indorsement,  117,  119. 
restrictive  indorsement,  117,  122. 
nature  of  indorsement,  125. 

as  a  contract,  125. 

as  a  transfer,  125,  128. 
requisites  of  indorsement,  128. 

following  tenor  of  instrument,  12S. 

who  may  indorse,  131. 

necessity  for  delivery,  133. 
anomalous  or  irregular  indorsements.  135. 

by  person  whose  name  does  not  otherwise  appear,  13.5. 

indorsement  before  indorsement  and  transfer  by  payee,  135. 
title  of  indorsee,  12. 
not  subject  to  equities  between  original  parties,  12. 

see  "Defenses." 
forgery  of  indorsement,  234,  241. 
accommodation  indorser,  see  "Accommodation," 


INDEX.  451 

[The  figures  refer  to  pages.] 

INDORSEMENT— Continued, 
liability  of  indorser,  153. 
warranties  or  facts  which  indorser  is  estopped  to  deny,  159. 

that  the  bill  or  note  will  be  accepted  and  paid,  159. 

genuineness  of  instrument,  159. 

that  the  instrument  is  a  valid  and  subsisting  obligation,  159. 

that  the  obligations  of  all  prior  parties  are  valid,  159. 

capacity  of  prior  parties,  159. 

that  he,  as  indorser,  has  title  and  the  right  to  transfer,  159. 

indorser  without  recourse,  1G6. 
damages  against  indorser,  1G7. 
genuineness  of,  estoppel  of  acceptor,  147. 
discharge  of  indorser,  279,  2S7. 
payment  to  another  than  the  holder,  12. 
competency  of  payee  to  indorse,  estoppel  of  acceptor,  142. 
necessity  for,  to  transfer  instrument,  193. 
effect  of  failure  to  indorse  by  mistake  or  otherwise,  193.  , 

INFANCY. 

as  a  defense,  208. 

instruments  executed  by  infants,  66,  208. 

indorsement  and  transfer  by  infant,  60,  208. 

INLAND   BILL. 

see  "Bill  of  Exchange." 

INSANITY. 

see  "Lunacy." 

INTOXICATION, 

see  "Drunkenness." 

K 

KNOWLEDGE, 

see  "Notice." 

L 

LARCENY. 

see  "Stolen  Instrument." 

LAW   MERCHANT. 

defined  and  explained,  2. 

LOST   INSTRUMENT, 

rights  of  bona  fide  holder,  111. 

LUNACY. 

as  a  defense,  216. 

instruments  executed  by  persons  non  compos  mentis,  66,  216. 

indorsement  and  transfer  by  person  non  compos  mentis,  (50,  210. 


452  '  INDEX. 

[The  figures  refer  to  pa{j«>s.J 
M 

MAKER. 

of  note,  defined,  27. 

signature  of.  57.  58. 

liability  of.   141. 

damages  against,  1G7. 

capacity  of,  warranty  by,  or  estoppel  of  indorser.  1."39. 

accommodation  maker,  see  "Accommodation." 

MARRIED  WOMEN, 

marriage  of  holder,  rights  of  husband,  191. 
transfer  to  married  woman,  rights  of  husband,  191. 
coverture  as  a  defense,  210. 
Instruments  executed  by,  G6,  210. 
indorsement  and  transfer  by,  66,  210. 

MEASURE  OF  DAMAGES, 
see  "Damages." 

iTEDIUM  OF  PAYMENT. 
in  general.  49. 

MEMORANDUM  CHECKS, 
in  general,  283. 

MERCHANTS, 

see  "Custom  of  Merchants." 

MONEY. 

defined,  HO. 

instrument  must  be  payable  in,  49-53. 


N 

NEGOTIABILITY, 

origin  of.  1-8. 
purpose  of.  10-18. 
indicia  of.  13-16. 

see  "Bill  of  Exchange";   "Promissory  Note." 
distinguished  fi'om  assignability,  8-13. 

see  "Assignment";    "Indorsement";    "Transfer.** 
the  statute  of  Anne,  2,  4. 

construction  of,  5. 
the  custom  of  merchants,  or  law  merchant,  defined  and  explained,  2. 

s^e  "Bill  of  Exchange";    "Checks";   "Defenses";   "Indorsement";  "Pur- 
chaser for  Value  without  Notice";   "Transfer." 

NEGOTIABLE   INSTRUMENTS. 

see  "Bill  of  Exchange";    "Check";   "Promissory  Note." 


INDEX.  453 

[The  figures  refer  to  pages.] 


fTON  COMPOS  MENTIS, 

see  "Drunkenness";   "Lunacy." 

NON-NEGOTIABLE  INSTRUMENTS, 

distinguished  from  negotiable  instruments,  1,  5-7. 
assignment  of.  S-13. 

see  "Assignment." 
distinguished  from  negotiation.  8-13. 
presumption  of  consideration,  5-7. 

NOTE, 

see  "Promissory  Note." 

NOTICE, 

of  assignment  of  non-negotiable  instrument,  10. 
of  equities.  300. 

see  "Purchaser  for  Value  without  Notice." 

NOTICE  OF  DISHONOR, 
necessity  for,  320. 
defined,  352. 

how,  when,  and  where  it  must  be  given,  352. 
sufficiency  of  notice,  353. 
identification  of  instrument,  355. 
statement  of  presentment,  etc.,  357. 
by  whom  notice  should  be  given,  360. 
to  whose  benefit  notice  accrues,  3G2. 
method  of  giving  notice.  3G3. 
time  of  giving  notice,  368. 

effect  of  failure  to  give  notice  of  dishonor,  341,  342. 
excuses  for  failure  to  give  notice,  371. 
waiver  of  notice.  377. 

of  non-payment  by  acceptor  supra  protest,  149. 
of  checli.  388. 

NOTARIAL  FEES,  ,, 

see   "Damages." 

NUDUM  PACTUM, 
see  "Consideration." 

o 

OPERATION  OF  LAW, 
transfer  by,  191. 

ORDER, 

contained  in  bill,  2S. 

see  "Bill  of  Exchange.** 


454  INDEX. 

[The  figures  refer  to  pages.] 

ORIGIN, 

of  negotiability,  1. 

OVERDUE  PAPER. 

may  be  transferred.  199. 
rights  of  transferee,  199. 


PAROL  ACCEPTANCE, 
see  "Acceptance." 

PARTIES, 

to  bill.  25. 

to  promissory  note.  27. 

who  may  indorse.  13L 

immediate  parties,  181. 

remote  parties,  181. 

who  may  sue  on  instrument,  184. 

who  may  accept  bill,  SC,  87. 
see  "Acceptance." 

accommodation  parties,  see  "Accommodation." 

certainty  as  to,  59. 

specification  of,  57. 

capacity  of  parties.  GQ. 

see  "Acceptor";  "Corporations";  "Drawee";  "Drawer";  "Drunken- 
ness"; "Holder";  "Infancy";  "Indorsee";  "ludorser";  "Lunacy"; 
"Maker";   "Married  Women";   "Payee." 

PAYEE, 

of  bill,  defined,  25. 

of  note,  defined,  27. 

designation  of,   57.   G2. 

payable  to  order  of  maker  or  drawer.  57.  C4. 

payable  to  fictitious  person,  57,  04.  ' 

competency  to  indorse,  estoppel  of  acceptor,  142. 

PAYMENT, 

medium  of,  49. 

time  of  payment,  days  of  grace,  77. 

discount  of  bill  by  drawee  before  acceptance.  SI. 

by  negotiable  instrument,  effect.  18-23. 

when  a  discharge  and  defense,  12,  279,  280. 

of  non-negotiable  instrument  to  assignor,  rights  of  assignee,  9-12. 

PERSONAL   DEFENSES, 
see  "Defenses." 


INDEX.  455 

[The  figures  refer  to  pages.l 

PERSONAL  REPRESENTATIVES, 
see  "Executors  and  Administrators." 

PRESENTMENT, 
necessity  for,  320. 
purposes  of,  321. 
manner  of.  321.  322. 
time  of,  45,  77,  321,  327. 
days  of  grace,  77. 
place  of,  321,  322,  336. 
by  whom  and  to  whom,  341. 
effect  of  failure  to  present,  341. 
excuses  for  failure  to  present,  371. 
to  acceptor  supra  protest,  149. 

to  drawee  to  flx  liability  of  acceptor  supra  protest.  149. 
of  check.  3S8. 

PRESUMPTION, 

of  consideration  for  non-negotiable  Instrument,  5-7. 

of  title  in  holder.  12. 

as  to  whether  party  is  a  purchaser  for  value  without  notice,  310. 

PRINCIPAL  AND  AGENT. 

power  of  agent  to  transfer  instrument,  GC 
whether  he  incurs  liability,  66. 

PROMISE. 

contained  in  note.  32. 

see  "Promissory  Note." 

PROMISSORY   NOTE, 
defined.  27. 
the  statute  of  Anne.  2,  4. 

construction  of.  5. 
non-negotiable  note,  5-7. 
payment  by,  18-23. 
parties  to  note.  27. 
origin  of  negotiability  of,  1. 
form,  27. 

negotiability  not  necessary  to  form  or  substance  of,  L 
essentials  of  note,  in  general,  28. 
indicia  of  negotiability,  13. 
days  of  grace.  77. 
delivery,  G9. 

in  escrow,  69. 
date,  74. 
place  of  date,  75. 


466  INDEX. 

[The  figures  refer  to  pages.] 

PROMISSORY  NOTE— Continued, 
the  promise  contained  In  note,  32. 

certainty  as  to  terms,  8-4. 

uncertainty  as  to  event,  34,  37. 

uncertainty  as  to  time,  34,  38. 

payment  out  of  particular  fund,  35,  40. 

additional  condition  or  agreement  not  of  essence  of  promise,  35,  43. 

giving  bolder  option  of  payment  In  money  or  some  other  thing,  35,  45. 

payable  on  demand  or  at  sight,  etc.,  35,  45. 

no  time  of  payment  expressed,  35,  47. 

payable  in  installments.  35.  48, 

must  be  for  payment  of  money  only,  49. 

payment  in  property  other  than  money,  49,  51. 
option  given  holder,  35,  45. 

performance  of  other  acts  in  addition  to  payment  of  money,  49,  53. 

definition  of  money.  50. 

amount  must  be  certain,  49,  55. 
interest,  49.  56. 
exchange,  49,  56. 

payable  in  foreign  money,  52. 
specification  of  parties,  57. 

signature  of  maker,  57,  58. 

certainty  as  to  parties,  59. 

designation  of  payee,  57,  62. 

payable  to  order  of  maker,  57,  04. 
payable  to  fictitious  person,  57,  64. 
necessity  for  and  meaning  of  "value  received,"  70. 
accommodation  parties,  see  "Accommodation." 
liability  of  maker,  141, 

see  "Maker." 
liability  of  indorser,  see  "Indorsement.** 

PROTEST, 

necessity  for,  effect  of  failure  to  protest,  342. 
acceptance  supra  protest,  102. 
In  order  to  hold  acceptor  supra  protest,  149. 
on  nonpayment  by  acceptor  supra  protest,  149. 
of  check,  388. 

PUBLIC  POLICY. 

agreements  in  contravention  of,  273. 

PURCHASER  FOR  VALUE  WITHOUT  NOTICE, 
who  Is  a  purchaser  for  value  without  notice,  292. 
value,  293. 
notice,  300. 


INDEX.  467 

[The  figures  refer  to  pages.] 

PURCHASER  FOR  VALUE  WITHOUT  NOTICE— Contimied 
overdue  paper,  199. 

presumption  and  burden  of  proof,  and  order  of  proof,  310. 
defenses  as  against,  206. 

defenses  as  real  or  personal,  20G. 
real  defenses,  208. 
personal  defenses,  245. 
coverture,  210. 
Infancy,  208. 

corporations,   ultra  vires,  211. 
persons  non  compos  mentis,  216. 
drunken  pei-sous,  216. 
statutes  avoiding  instrument,  223. 
usury,  225. 
alterations,  234,  236. 
forgery,  234.  241. 

fraud,  duress,  and  undue  influence,  247. 
want  or  failure  of  consideration,  250,  261. 
Illegality  of  consideration,  223,  207. 
statutory  prohibition,  223,  268. 

violation  of  the  Sunday  laws,  270. 
other  statutes,  272. 
common-law  prohibition,  272. 
contravention  of  public  policy,  273. 
in  general.  273. 
restraint  of  trade,  274. 
effect  of  illegality.  276. 

illegality  as  being  total  or  partial,  276. 
knowledge  of  illegality,  intention,  277. 
discharge  of  the  insti-ument  and  of  the  parties  thereto,  279. 
payment,  279.  280. 

discharge  by  operation  of  law,  279,  286. 
discharge  by  agreement,  279.  286. 
discharge  of  drawer  or  indorser  by  prejudicial  acts  or  neglect  of 

holder,  279,  287. 
other  methods  of  discharge,  fmud,  diversion,  etc.,  200. 
stolen  Instruments,  110. 
lost  instruments.  111. 

PURPOSE. 

of  negotiability,  16. 


458  INDEX. 

[The  figures  refer  to  pages.] 

Q 

QUALIFIED  ACCEPTANCE, 
in  general,  S3.  8G. 
see   "Acceptance.** 

R 

REAL  defenses; 
see  "Defenses." 

RE-EXCHANGE, 
see  "Damages." 

RESTRAINT  OF  TRADE, 
agreement  in.  274. 

RESTRICTIVE  INDORSEMENT, 
in  general.  117.  122. 
see  "IndorsemenL" 

S 
SATISFACTION, 

see  "Discharge  of  Instrument." 

SET-OFF. 

see  "Defenses." 

SIGNATURE, 

sufficiency,  57,  58. 

of  indorser,  lOS. 

of  drawer,  estoppel  of  acceptor  to  deny.  142. 

STATUTE  OF  FRAUDS, 

parol  acceptance  or  promise  to  accept,  Dl,  93,  100. 

STATUTES, 

the  statute  of  Anne,  2,  4. 

construction  of.  5. 
statutory  avoidance  of  instrument,  223. 

STOLEN  INSTRUMENT, 
transfer  of,  12. 
rights  of  bona  flde  holder,  110. 

SUNDAY, 

violation  of  the  Sunday  laws,  270. 

SUPRA  PROTEST, 

acceptance  supra  protest,  102. 

SURETIES. 

discharge  of  drawer  or  indorser,  279,  287. 

SURVIVORSHIP. 

of  joint  payee  or  indorsee,  19L 


INDEX.  459 

[The  figures  refer  to  pages.] 
T 


TENOR. 

of  bill,  S2,  S3. 

TIME, 

of  payment,  days  of  grace,  77.  ' 

TITLE. 

of  indorsee  or  holder,  see  "Indorsement";   "Transfer, 
presumed  to  be  in  holder.  12. 
warranty  of,  by  indorser,  159. 

TRADE,  RESTRAINT  OP. 
unlawful  agi-eements,  27-L 

TRANSFER. 

In  general.  180-201. 
defined.  ISO. 

validity  as  between  immediate  parties.  ISl. 
methods  of  transfer,  188. 
by  assignment,  189. 

rights  of  assignee,  190. 
by  operation  of  law,  191. 
death  of  holder.  191. 
bankruptcy  of  holder.  191. 
marriage  of  feme  sole,  191. 
husband  and  wife,  191. 
death  of  joint  payee  or  indorsee,  191. 
by  indorsement,  see  "IndorsemenL" 
by  delivery.  197. 
overdue  paper,  199. 

rights  of  transferee,  199. 
of  nonnegotiable  instrument,  see  "AssignmenL" 
of  lost  instrument,  111. 
of  stolen  instrument,  12,  110. 
title  of  holder,  12. 
presumption  of  title  in  holder,  12. 
not  subject  to  equities  between  original  parties,  12. 

TRUSTEES. 

power  to  transfer  instrument,  GG. 
whether  they  incur  liability,  GG. 

u 

ULTRA  VIRES, 

see  "Corporations." 

UNDUE  INFLUENCE, 
as  a  defense.  247. 


-ItiO  INDEX. 

[The  figures  refer  to  pages.] 

UNLAWFUL  AGREEMENTS, 
In  general,  223,  207. 
see  "Consideration." 

UNCERTAINTY, 
as  to  parties.  57. 
as  to  amount  to  be  paid,  49. 
as  to  order  in  bill  or  promise  in  note,  34. 

USURY, 

as  a  defense.  225. 

V 

A'ALUE, 

what  constitutes,   293. 

see  "Purchaser  for  Value  Without  Notice." 
VALUE   RECEIVED. 

necessity  for  and  meaning  of  expression,  76. 

VERBAL  ACCEPTANCE, 
see  "Acceptance." 

W 

WARRANTIES, 
by  acceptor,  142. 

genuineness  of  drawer's  signature,  142. 

existence  of  drawer,  142. 

capacity  of  drawer,   142. 

authority  to  make  draft,  142. 

payee's  competency  to  indorse.  142. 
facts  which  acceptor  does  not  admit,  147. 

genuineness  of  payee's  and  subsequent  Indorsements,  147. 

genuineness  of  terms  contained  in  bill,  147. 
by  drawer,  15G. 

existence  of  drawee.  156. 

capacity  of  drawee  to  accept,  15G. 

that  the  drawee  will  accept,  15G. 
by  indorser.  159. 

that  the  bill  or  note  will  be  accepted  and  paid,  1.j9. 

genuineness  of  instrument,  159. 

that  the  instrument  is  a  valid  and  subsisting  obligation,  159. 

that  the  obligations  of  all  prior  parties  are  valid,  159. 

rapacity  of  prior  parties,  159. 

that  he,  as  indorser,  has  title,  and  the  right  to  transfer,  159. 

Indorser  without  recourse.  IGG. 
damages  for  breach,  167. 

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in  which  certain  special  and  original  features  are  made  prominent 
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of  the  subject.  Like  the  syllabus  of  a  case,  this  affords  a  bird's-eye 
view  of  the  whole  and  its  parts,  and  will  be  found  useful  by  the  lawyer 
who  wishes  to  refresh  his  memory  of  the  outlines  of  this  branch  of  the 
law. 

2.  A  Commentary,  being  a  more  extended  presentation  of  the  top- 
ics in  the  leading  analysis,  distinguished  by  being  set  in  different  type. 
The  typographical  separation  of  these  two  parts  enables  the  examiner 
to  obtain,  in  the  first  place,  a  general,  comprehensive  grasp  of  the  sub- 
ject as  a  whole,  and  of  the  relation  of  one  part  to  another,  and,  by  re- 
reading in  connection  with  the  more  extended  commentary,  to  fix  the 
details  clearly  in  mind. 

3.  Notes,  in  still  different  type,  containing  a  copious  citation  of 
authorities,  including  the  leading  and  most  important  cases.  These 
are  so  distinguished  as  to  still  further  illustrate  the  principles. 


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SECOND   EDITION. 


TABLE    OF   CONTENTS. 


Chapter  I. 

OP  NEGOTIABILITY  SO  FAR  AS  IT  RE- 
LATES TO  BILLS  AND  NOTES:  Covering 
the  origin,  purpose  and  indicia  of  negotiabil- 
ity, distinction  between  negotiability  and  as- 
signability, and  payment  by  negoiiable  instru- 
ment. 

Chapter  II. 

OF  NEGOTIABLE  BILLS  AND  NOTES,  AND 
THEIR  FORMAL  AND  ESSENTIAL  REQ- 
,  UISITES:  Covering  definition,  form,  and  es- 
sentials, the  order,  the  promise,  specification 
of  parties,  capacity  of  parties,  delivery,  date, 
value  received,  and  days  of  grace. 

Chapter    III. 

ACCEPTANCE  OF  BILLS  OF  EXCHANGE: 
Covering  the  various  kinds  of  acceptance,  and 
the  rules  rehiting  thereto. 

Chapter  IV. 

INDORSEMENT:  Defining  and  explaining  the 
various  kinds  of  indorsements,  and  showing 
their  requisites  and  effect. 

Chapter   V. 

OF  THE  NATURE  OF  THE  LIABILITIES  OF 
THE  PARTIES:  Covering  liability  of  mak- 
er, acceptor,  drawer,  indorser,  rights  and  lia- 
bilities of  accommodation  and  accommodated 
parties,  estoppel  and  warranties,  and  damages 
for  breach. 


Chapter  VI. 

TRANSFER:  Covering  definition,  validity,  and 
various  methods  of  transfer,  and  status  of 
overdue  paper. 


Chapter  VII. 

DEFENSES  AS  AGAINST  PURCHASER  FOR 
VALUE  WITHOUT  NOTICE:  Covering  the 
subject  generally  and  fully. 


Chapter   VIII. 

THE  PURCHASER  FOR  VALUE  WITHOUT 
NOTICE:  Explaining  who  are,  and  discuss- 
ing consideration,  good  faith,  notice,  overdue 
paper,  presumption,  and  burden  of  proof,  etc. 


Chapter   IX. 

OF  PRESENTMENT  AND  NOTICE  OF  DIS- 
HONOR: Covering  presentment  for  accept- 
ance and  for  payment,  dishonor,  protest,  no- 
tice of  dishonor,  waiver,  eta 


Chapter   X. 

CHECKS:    Coveriuii  yeuurally  the  law  relating 
to  checks. 


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TABLE  OF  CONTENTS. 


CHAPTER  I. 

DEFINITION  OF  CRIME :  The  nature  of  crime 
and  ground  of  punishment. 

CHAPTER  II. 

CRIMINAL  LAW :  How  the  criminal  law  is  pre- 
scribed; the  common  law:  statutes,  and  the 
powers  of  state  and  federal  legislatures. 

CHAPTER  III, 

CLASSIFICATION  OF  CRIMES:  As  treason,  fel- 
onies, misdemeanors,  etc. ;  merger  of  offenses. 

CHAPTER  IV. 

THE  MENTAL  ELEMENT  IN  CRIME:  Con- 
sidering the  will,  intention,  motive,  and  crim- 
inal intention  or  malice. 

CHAPTER  V. 

PERSONS  CAPABLE  OF  COMMITTING  CRIME: 
Covering  also  exemption  from  responsibility, 
and  discussing  infancy,  insanity,  drunkenness, 
ignorance  or  mistake  of  law  or  of  fact,  provo- 
cation, necessity  and  compulsion,  married  wo- 
men and  corporations. 

CHAPTER  VI. 

PARTIES  CONCERNED:  Covering  effect  of 
joining  in  criminal  purpose,  principles  in  first 
and  second  degrees,  accessories  before  and 
after  the  fact,  terms  "  aider  and  abettor  "  and 
"accomplice. " 

CHAPTER  VII. 

THE  OVERT  ACT :  Covering  also  attempts,  so- 
licitation and  conspiracy. 

CHAPTER  VIII. 

OFFENSES  AGAINST  THE  PERSON:  Cover- 
ing homicide,  murder,  and  manslaughter,  with 
consideration  of  tbe  different  degrees,  acci- 
dent, self-defense,  etc. 

CHAPTER  IX. 

OFFENSES  AGAINST  THE  PERSON  (Contin- 
ued) :  Covering  abortion,  mayhem,  rane,  sod- 
omy, seduction,  assaults,  false  imprisonment, 
kidnapping,  abduction. 


CHAPTER  X. 

OFFENSES  AGAINST  THE  HABITATION: 
Covering  arson  and  burglary. 

CHAPTER  XI. 

OFFENSES  AGAINST  PROPERTY:  Covering 
larceny,  embezzlement,  cheating  at  common 
law  and  by  false  pretenses,  robbery,  receiving 
stolen  goods,  malicious  mischief,  forgery,  etc. 

CHAPTER  XII. 

OFFENSES  AGAINST  THE  PUBLIC  HEALTH, 
MORALS,  ETC. :  Covering  nuisances  in  gen- 
eral, bigamy,  polygamy,  adultery,  fornication, 
lewdness,  etc. 

CHAPTER  Xm. 

OFFENSES  AGAINST  PUBLIC  JUSTICE  AND 
AUTHORITY:  Covering  barretry,  obstructs 
ing  justice,  embracery,  prison  breach,  mispri- 
sion of  felony,  compounding  crime,  perjury, 
bribery,  misconduct  in  office,  etc. 

CHAPTER  XIV. 

OFFENSES  AGAINST  THE  PUBLIC  PEACE: 

Covering  dueling,  unlawful  assembly,  riot, 
affray,  forcible  entry  and  detainer,  libels  on 
private  persons,  etc. 

CHAPTER  XV. 

OFFENSES  AGAINST  THE  GOVERNMENT: 
Covering  treason  and  misprision  of  treason. 

CHAPTER  XVI. 

OFFENSES  AGAINST  THE  LAW  OF  NA- 
TIONS:    As  piracy. 

CHAPTER  XVII. 

JURISDICTION:  Covering  territorial  limits  of 
states  and  United  States,  jurisdiction  as  deter- 
mined by  locality,  federal  courts  and  the  com- 
mon law,  jurisdiction  conferred  by  congress, 
persons  subject  to  our  laws,  etc. 

CHAPTER  XVIII. 

FORMER  JEOPARDY :     In  general. 


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CHAPTER  I. 

CONTRACT  IN  GENERAL:  Covering  its  defl- 
nition,  nature,  and  requisitps,  and  discussing 
agreement,  obligation,  promise,  void,  voidable, 
and  unenforceable  agreements,  and  the  essen- 
tials of  contract,  etc. 

CHAPTER  n. 

OFFER  AND  ACCEPTANCE:  Covering  im- 
plied contracts,  necessity  for  communication 
and  acceptance,  character,  mode,  place,  time, 
and  effect  of  acceptance,  revocation,  and  lapse 
of  offer,  etc 

CHAPTER  III. 

CLASSIFICATION  OF  CONTRACTS:  Cover- 
ing contracts  of  record  and  contracts  under 
seal,  and  their  characteristics. 

CHAPTER  IV. 

REQUIREMENT  OF  WRITING:  Covering  also 
statute  of  frauds,  and  discussing  promise  by 
executor,  promise  to  answer  for  another, 
agreements  in  consideration  of  marriage  and 
In  relation  to  land,  and  agreements  not  to  be 
performed  within  a  year,  sufhoiency  of  memo- 
randum, etc. 

CHAPTER  V. 

CONSIDERATION:  Covering  the  necessity  for 
consideration,  its  adequacy,  reality,  and  legal- 
ity, failure  of  consideration,  etc. 

CHAPTER  VI. 

CAPACITY  OP  PARTIES :  Covering  political 
and  professional  status,  infants,  insane  and 
drunken  persons,  married  women,  and  corpo- 
rations. 


CHAPTER  Vn. 

REALITY  OF  CONSENT:  Covering  mistake, 
misrepresentation,  fraud,  duress,  and  undue 
influence. 

CHAPTER  VHI. 

LEGALITY  OF  OBJECT:  Covering  unlawful 
agreements  in  general,  agreements  in  viola- 
tion of  positive  law  and  those  contrary  to  pub- 
lic policy,  effect  of  illegality,  conflict  of  laws, 
eta 

CHAPTER  IX. 

OPERATION  OF  CONTRACT:  Covering  the 
limits  of  the  contractual  relation,  assignment 
of  contracts,  whether  by  act  of  parties  or  by 
operation  of  law,  joint  and  several  contracts, 
etc. 

CHAPTER  X. 

INTERPRETATION  OP  CONTRACT:  Cover- 
ing the  rules  relating  to  evidence,  proof  of 
document,  rules  of  construction,  penalties  and 
liquidated  damages,  etc. 

CHAPTER  XI. 

DISCHARGE  OF  CONTRACT:  Covering  dis- 
charge by  agreement,  by  performance,  by 
breach,  by  impossibility  of  performance,  by 
operation  of  law,  etc.,  and  remedies  on  breach 
of  contract. 

CHAPTER  XII. 

AGENCY:  Covering  the  creation  of  the  relation, 
its  effect  and  determination,  the  capacity, 
rights,  and  liabilities  of  the  parties,  etc. 

CHAPTER  XIII. 

QUASI  CONTRACT:  Covering  obligations  cre- 
ated by  law  upon  which  an  action  ex  contractu 
will  lie  without  proof  of  contract  in  fact,  in- 
cluding judgment-j,  obligations  imposed  by 
statute,  acts  of  parties,  etc. 


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5EC0ND  EDITION. 


TABLE   OF   CONTENTS. 


Chapter   I. 

FORMS  OF  ACTION :  Coveriijg  the  nature  and 
classiflcation  of  actions,  real,  personal,  and 
mixed  actions,  assumpsit,  special  and  general, 
debt,  covenant,  account  or  account  rendered. 

Chapter   II. 

FORMS  OF  ACTION  (Continued):  Covering 
trespass,  trover,  case,  detinue,  replevin,  eject- 
ment, writ  of  entry,  forcible  entry  and  detain- 
er, etc. 

Chapter  III. 

THE  PARTIES  TO  ACTIONS:  Covering  actions 
in  form  ex  contractu  and  ex  delicto,  and  the 
consequences  of  misjoinder  or  nonjoinder  of 
parties  plaintiff  or  defendant. 

Chapter  IV. 

THE  PROCEEDINGS  IN  AN  ACTION:  Cover- 
ing process,  the  summons,  writ  of  attachment, 
appearance,  the  declaration,  demurrer,  and  va- 
rious pleas,  amendments,  etc.,  the  verdict,  and 
proceedings  after  the  verdict,  the  judgment, 
and  proceedings  thereafter  to  the  writ  of  exe- 
cution. 

Chapter  V. 

THE  DECLARATION:  Statement  of  cause  of 
action  in  general;  form  of  declaration;  es- 
sential averments  of  declaration  in  special  as- 
sumpsit or  on  common  counts,  in  debt,  cove- 
nant, account,  case,  detinue,  trover,  trespass, 
replevin,  ejectment,  and  trespass  for  mesne 
profits  after  ejectment. 

Chapter  VI. 

THE  PRODUCTION  OF  THE  ISSUE:  Discuss- 
ing the  rules,  and  covering  the  demurrer,  the 
pleadings,  the  traverse,  forms  of  the  general 
issue  and  of  the  special  traverse,  protesta- 
tions, exceptions,  issues  in  fact  and  law,  etc. 


Chapter  VII. 

MATERIALITY  IN  PLEADING:  Covering  the 
general  rule,  variance,  limitation  of  traverse, 
etc. 

Chapter  VIII. 

SINGLENESS  OR  UNITY  IN  PLEADING:  Cov- 
ering the  rules  in  general,  duplicity,  immate- 
rial matter,  inducement,  protestation,  conse- 
quences of  duplicity  and  of  misjoinder,  plea 
and  demurrer,  etc. 

Chapter   IX. 

CERTAINTY  IN  PLEADING:  Covering  the 
venue,  time,  quantity,  quality,  and  value, 
names  of  persons,  showing  title  and  author- 
ity, with  subordinate  rules,  and  special  re- 
quirements in  different  stages. 

Chapter  X. 

CONSISTENCY  AND  SIMPLICITY  IN  PLEAD- 
ING :  Covering  insensibility,  repugnancy,  am- 
biguity, argumentative  pleadings,  pleadings 
in  alternative,  positive  statements,  legal  effect, 
conformance  to  precedent,  commencement  and 
conclusion. 

Chapter    XI. 

DIRECTNESS  AND  BREVITY  IN  PLEADING: 

Covering  the  rules  generally,  departure,  pleas 
amounting  to  general  issue,  surplusage,  etc. 

Chapter  XII. 

MISCELLANEOUS  RULES:  Covering  con- 
formance to  process,  alleging  damages  and 
production  of  suit,  order  of  pleading,  defense, 
plea  in  abatement,  dilatory  pleas,  etc. 

APPENDIX:    Forms. 


This  book  embodies  such  of  the  rules  and  principles  of  Common-Law  Pleading  as  are  still 
recognized  and  applied  in  this  country.  A  knowledge  of  the  common-law  system  is  of  advantage,  ii 
indeed,  it  is  not  essential,  to  a  thorough  understanding  of  both  code  and  equity  pleading. 

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^econb  (B^  if  ton. 

TABLE     OF     CONTENTS. 


Chapter  I. 

DEFINITIONS  AND  GENERAL  PRINCIPLES: 
Considering  the  mciining  of  "Constitutional" 
and  "Unconstitutional;  "  written  and  unwrit- 
ten constitutions,  bills  of  rights,  right  of  revo- 
lution, political  and  personal  responsibilities, 
etc. 

Chapter  II. 

THE  UNITED  STATES  AND  THE  STATES: 
Considering  the  nature  of  the  American 
Union,  sovereignty  and  rights  of  the  states 
and  of  the  people,  form  of  government,  the 
Federal  Constitution,  etc. 

Chapter   HI. 

ESTABLISHMENT  AND  AMENDMENT  OF 
CONSTITUTIONS:  Containing  an  historical 
introduction,  and  considering  the  establish- 
ment and  amendment  of  the  Federal  Constitu- 
tion and  of  State  Constitutions. 

Chapter   IV. 

CONSTRUCTION  AND  INTERPRETATION  OF 
CONSTITUTIONS:  Considering  the  office 
and  duty  of  the  judiciary  in  this  direction. 

Chapter   V. 

THE  THREE  DEPARTMENTS  OF  GOVERN- 
MENT: Considering  the  division,  limitations 
on  the  departments,  political  and  judicial 
Questions,  etc. 

Chapter   VI. 

THE  FEDERAL  EXECUTIVE:  Considering 
the  election,  qualifications,  impeachment, 
compensation  and  independence  of  the  Presi- 
dent, his  oath  of  office,  veto  power,  pardoning 
and  military  power,  and  treaty-making  power; 
vacancy  in  office,  the  cabinet,  appointments 
to  office,  presidential  messages,  diplomatic  re- 
lations, authority  to  convene  and  adjourn  con- 
gress, execute  the  laws,  etc. 

Chapter   VII. 

FEDERAL  JURISDICTION:  Considering  the 
jurisdiction,  powers  and  procedure  of  Federal 
courts,  removal  of  causes,  the  United  States 
and  the  states  as  parties,  etc. 

Chapter   VIII. 

THE  POWERS  OF  CONGRESS:  Considering 
the  constitution,  organization  and  government 
of  congress,  its  powers,  and  the  limitations 
thereon. 

Chapter   IX. 

INTERSTATE  LAW,  as  determined  by  the  Con- 
stitution: Considering  its  general  principles, 
the  privileges  of  citizens,  interstate  extradi- 
tion, public  acts  and  judicial  proceedings,  etc. 

Chapter    X. 

REPUBLICAN  GOVERNMENT  GUARANTIED. 


Chapter    XI. 

EXECUTIVE  POWER  IN  THE  STATES. 
Chapter   XII. 

JUDICIAL  POWERS  IN  THE  STATES:  Con- 
sidering the  system  of  courts,  judges,  juris 
diction,  process  and  procedure. 

Chapter   XIII. 

LEGISLATIVE  POWER  IN  THE  STATES :  Con- 
sidering the  organization  and  government  of 
legislature,  limitation  and  delegation  of  legis- 
lative powers,  enactment  of  laws,  etc. 

Chapter    XIV. 

THE  POLICE  POWER:  Considering  the  police 
power  as  vested  in  congress  and  in  the  states, 
and  its  scope  and  limitations. 

Chapter  XV. 

THE  POWER  OF  TAXATION:  Considering 
the  purposes  of  taxation,  independence  of 
Federal  and  State  governments,  limitations  on 
power,  taxation  and  representation,  etc 

Chapter  XVI. 

THE  RIGHT  OF  EMINENT  DOMAIN:  Defini- 
tion and  nature  of  the  power,  constitutional 
provisions,  authority  to  exercise,  public  pur 
po33,  appropriation  to  new  uses,  etc 

Chapter   XVII. 

MUNICIPAL  CORPORATIONS:  The  nature, 
control,  powers,  officers  and  by-laws  of  mu- 
nicipal corporations,  etc. 

Chapter   XVIII. 

CIVIL  RIGHTS,  AND  THEIR  PROTECTION 
BY  THE  CONSTITUTION:  Considering 
rights  in  general,  liberty,  due  process  of  law, 
vested  rights,  trial  by  jury,  etc. 

Chapter  XIX. 

POLITICAL  AND  PUBLIC  RIGHTS:  Consider 
ing  citizenship,  right  of  suffrage,  freedom  of 
speech,  right  of  assembly  and  petition,  etc. 

Chapter  XX. 

CONSTITUTIONAL  GUARANTIES  IN  CRIM 
INAL  CASES:  Considering  trial  by  jury, 
rights  of  accused,  jeopardy,  bail,  ex  post  facto 
laws,  habeas  corpus,  etc. 

Chapter  XXI. 

LAWS  IMPAIRING  THE  OBLIGATION  OP 
CONTRACTS:  Considering  the  obligation 
and  the  impairment  ot  the  contract,  power  of 
legislature  to  contract,  remedies  on  contracts. 

Chapter   XXII. 

RETROACTIVE  LAWS:  Considering  the  validity 
of  retroactive  statutes,  curative  statutes,  eta 


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TABLE    OF    CONTENTS. 


Chapter   I. 

NATURE  AND  DEFINITION  OF  EQUITY. 

Chapter   II. 

PRINriPLES  DEFINING  AND  LIMITING  JU- 
RISDICTION: Considering, -jurisdiction  over 
crimes,  adequate  legal  remedy,  complete  re- 
lief, and  multiplicity  of  suits. 

Chapter   III. 

THE  MAXIMS  OF  EQUITY:  Definition  and 
classification  of  maxims;  the  enabling  and  re- 
strictive maxims. 

Chapter    IV. 

THE  DOCTRINES  OF  EQUITY:  Considering 
estoppel,  election,  satisfaction,  performance, 
and  conversion. 

Chapter   V. 

THE  DOCTRINES    OF    EQUITY    (Conttnueb)  : 

Considering  conflicting  rights  of  purchasers, 
assignees,  notice,  bona  fide  purchasers,  priori- 
ties, etc 

Chapter   VI. 

THE  DOCTRINES  OF  EQUITY  (Continued): 
Considering  penalties  and  forfeitures,  liqui- 
dated damages. 


Chapter   VII. 

GROUNDS   FOR  EQUITABLE   RELIEF: 
sidering  accident,  mistal^e,  fraud,  etc. 


Con- 


Chapter  vm. 

PROPERTY  IN  EQUITY— TRUSTS:  Covering 
definition,  history,  and  classification  of  trusts, 
charitable  trusts,  duties  and  liabilities  of  trus- 
tees, remedies  of  cestui  que  trust,  etc 

Chapter   IX. 

PROPERTY  IN  EQUITY  —  MORTGAGES, 
LIENS,  AND  ASSIGNMENTS. 

Chapter   X. 

EQUITABLE  REMEDIES :  Covering  accounting, 
contribution,  exoneration,  subrogation,  and 
marshaling. 

Chapter   XI. 

EQUITABLE  REMEDIES  (Continued):  Cov- 
ering partition  and  settlement  of  boundaries. 

Chapter   XII. 

EQUITABLE  REMEDIES  (Continued):  Cov- 
ering specific  performance,  and  considering 
enforceable  contracts,  grounds  for  refusing  re- 
lief, etc 

Chapter    XIII. 

EQUITABLE  REMEDIES  (Continued):  Cov- 
ering injunctions,  and  considering  their  juris- 
dictional principles,  classes  of  cases  where 
remedy  may  be  used,  etc. 

Chapter    XIV. 

REFORMATION,  CANCELLA.TION,  AND 
QUIETING  TITLE. 

Chapter   XV. 

ANCILLARY  REMEDIES :  Covering  discovery, 
bills  to  perpetuate  testimony,  interpleader, 
receivers,  etc 


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(^uf^or  of  a  "^an^fiooft  of  Criminaf  &at»/'  an^  a 
*'gan^6ooa  of  Controcfe." 


TABLE  OF  CONTENTS. 


Chapter   I. 

JURISDICTION :  Covering  courts  of  criminal  ju- 
risdiction and  venue. 

Chapter   II. 

APPREHENSION  OF  PERSONS  AND  PROP- 
ERTY :  Covering  arrest  in  general,  warrants, 
extradition,  searches  and  seizures  of  property, 
and  taking  property  from  prisoner. 

Chapter  III. 

PRELIMINARY  EXAMINATION,  BA.IL.  AND 
CO-MiMlTME^T:  Covering  right  to  release  on 
bail,  habjas  corpus,  the  recognizance,  release 
of  sureties,  etc. 

Chapter   IV. 

MODE  OF  ACCUSATION:  Covering  the  indict- 
ment and  presentment,  information,  coroner's 
inquisition,  time  of  prosecution,  and  nolle 
prosequi,  etc. 

Chapter   V. 

PLEADING— THE  ACCUSATION:  Covering 
form  of  indictment  in  general,  the  commence- 
ment, and  the  statement  of  offense  and  descrip- 
tion of  defendant. 

Chapter   VI. 

PLEADING  — THE  ACCUSATION  (Continued): 
Covering  alletration  of  intent,  kno\vled;;e,  etc. ; 
technical  terms;  second  or  third  offense;  set- 
ting forth  writings;  description  of  property 
and  persons;  ownership. 

Chapter   VII. 

I'LEADING— THE  ACCUSATION  (Continued): 
Covering  statement  of  time  and  place. 


Chapter   VIII. 

PLEADING— THE  ACCUSATION  (ConMntiea) : 
Covering  indictments  on  statutes. 

Chapter   IX. 

PLEADING— THE  ACCUSATION  (Continued): 
Covering  duplicity,  joinder  of  counts  and  par- 
ties, election,  conclusion  of  indictment,  amend- 
ment, aider  by  verdict,  etc. 

Chapter    X. 

PLEADING  AND  PROOF:  Covering  variance 
and  conviction  of  minor  and  higher  offense. 

Chapter   XI. 

MOTION  TO  QUASH:  Covering  also  arraign 
ment,  demurrer,  and  pleas  of  defendant. 

Chapter   XH. 

TRIAL  AND  VERDICT:  Covering  time  and  place 
of  trial,  custody  and  presence  of  defendant, 
bill  of  particulars,  the  counsel,  judge  and  jury, 
arguments  and  instructions,  etc. 

Chapter   XIII. 

PROCEEDINGS  AFTER  VERDICT:  Covering 
motion  in  arrest  of  judgment,  sentence,  new 
trial,  writ  of  error,  etc. 

Chapter   XIV. 

EVIDENCE:  Covering  facts  in  issue,  motive, 
res  gestae,  other  crimes,  declarations,  confes- 
sions, character,  burden  of  proof,  witnesses, 
etc. 

Chapter   XV. 

HABEAS  CORPUS. 


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^anbBooft  of  (Pe  Saw  of  ^afee 


QSj  irancts  (g.  tiffany,  (^.  (g.,  fe£.  (g.  (jgartxxrb). 

Author  of   "Tiffany  on  Death  by  Wrongful  Act" 


TABLE  OF  CONTENTS. 


Chapter   I. 

FORMATION  OF  THE  CONTRACT:  Covering 
the  capacity  of  parties,  who  may  sell,  the  thing 
sold,  mutual  assent,  form,  and  price. 

Chapter   II. 

FORMATION  OF  THE  CONTRACT  (Continued) : 
Covering  thestatute  of  frauds. 

Chapter   III. 

EFFECT  OF  THE  CONTRACT  IN  PASSING 
THE  PROPERTY:  Covering  sales  of  specific 
chattels, — unconditional  sales,  conditional  sales, 
sale  OD  trial  or  approval,  and  sale  or  return. 

Chapter   IV. 

EFFECT  OF  THE  CONTRACT  IN  PASSING 
THE  PROPERTY  (Continued):  Covering  sales 
of  chattels  not  specific,  appropriation  of  property 
to  the  contract,  regervation  of  right  of  disposal, 
etc 

Chapter   V. 

MISTAKE,    FAILURE    OF    CONSIDERATION, 

AND  FRAUD :  Showing  the  effect  of  mistake, 
failure  of  consideration,  and  fraud  generally, 
frauds  on  creditors,  the  delivery  necessary  as 
against  creditors  and  purchasers,  etc. 


Chapter   VI. 

ILLEGALITY:  Covering  sales  prohibited  by  the 
common  law,  by  public  policy,  and  by  statute; 
the  effect  of  illegality,  and  the  conflict  of  laws. 


Chapter   VII. 

CONDITIONS  AND  WARRANTIES:     Covering 
conditions  and  war  ranties  generally. 


Chapter   VIII. 

PERFORMANCE:     Covering  fully  delivery,  the 
buyer's  right  of   examination,  acceptance,  and 
payment- 
Chapter   IX. 

RIGHTS  OF  UNPAID  SELLER  AGAINST  THE 
GOODS:  Covering  the  seller's  lien,  stoppage 
in  transitu,  and  the  right  of  resale. 


Chapter   X. 

ACTION  FOR  BREACH  OF  THE  CONTRACT: 
Covering  the  various  remedies  of  the  seller  and 
of  the  buyer. 


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TABLE   OF    CONTENTS. 


INTRODUCTION. 

Covering  the  detinitiou,  source,  and  nature  of  In- 
ternational Law. 

Chapter   I. 

PERSONS  IN  INTERNATIONAL  LAW:  Cov- 
ering states,  their  loss  of  identity,  various  unions 
of  states,  de  facto  states,  belligerency  and  recog- 
nition thereof,  and  equality  of  states. 

Cliapter   II. 

THE  COMMENCEMENT  OF  STATES— FUNDA- 
MENTAL RIGHTS  AND  DUTIES:  Covering 
the  commencement  and  recosrnition  of  new 
states,  effect  of  change  of  sovereignty,  the  fun- 
damental right*  and  duties  of  states,  etc. 

Chapter    III. 

TERRITORIAL  PROPERTY  OF  A  STATE: 
Covering  modes  of  acquiring  property,  boun- 
daries, territorial  waters,  etc. 

Chapter   IV. 

TERRITORIAL  JURISDICTION:  Covering  ex- 
territoriality, sovereigns  and  diplomatic  agents 
and  their  immunities,  vessels,  right  of  asylum, 
alienage,  responsibility  for  mob  violence,  extra- 
dition, jurisdiction  beyond  state  limits,  etc. 

Chapter    V. 

JURISDICTION  ON  THE  HIGH  SEAS  AND 
UNOCCUPIED  PLACES:  Covering  nature  of 
jurisdiction,  jurisdiction  over  merchant  ships, 
piracy,  privateers,  letters  of  marque,  slave 
trade,  etc. 

Chapter   VI. 

THE  AGENTS  OF  A  STATE  IN  INTERNA- 
TIONAL RELATIONS:  Covering  public  diplo- 
matic agents  and  consuls,  and  matters  relating 
to  them. 

Chapter   VII. 

INTERVENTION:  Covering  the  subject  gener- 
ally. 

Chapter   VIII. 

NATIONALITY:  Covering  citizenship,  allegi- 
ance, expatriation,  naturalization,  etc. 

Chapter    IX. 

TREATIES:    Covering  the  subject  generally. 
Chapter    X. 

AMICABLE  SETTLEMENT  OF  DISPUTES: 
Covering  mediation,  arbitration,  retorsion,  re- 
prisals, embargo,  pacific  blockade,  etc. 

Chapter    XI. 

INTERNATIONAL  RELATIONS  IN  WAR: 
Covering  the  subject  of  war  generally,  includ- 
ing the  kinds,  causes,  and  objects  of  war. 

Chapter    XII. 

EFFECTS  OF  WAR— AS  TO  PERSONS:  Cov- 
ering the  relations  of  enemies,  noncombatants, 
privuteers,  prisoners  of  war,  and  the  subjects  of 
ransom,  parole,  etc. 


Chapter    XIII. 

EFFECTS  OF  WAR  — AS  TO  PROPERTY: 
Covering  contributions,  rtquisitions,  foraging, 
booty,  ransom,  and  other  questions  in  regard 
to  property. 

Chapter    XIV.  , 

POSTLIMINIUM:  The  right  and  its  limitations 
defined  and  explained. 

Chapter   XV. 

MILITARY  OCCUPATION:  Covering  the  defi- 
nition, extent,  and  effect  of  occupation,  and  the 
duties  of  an  occupant. 

Chapter   XVI. 

MEANS  OF  CARRYING  ON  HOSTILITIES 
Covering  the  instruments  and  means  of  war, 
spies,  etc. 

Chapter   XVII. 

ENEMY  CHARACTER:  Covering  enemies  gen 
erally,  domicile,  houses  of  trade,  property  and 
transfer  thereof,  etc. 

Chapter   XVIH. 

NON-HOSTILE  RELATIONS:  Covering  com 
mercia  belli,  flags  of  truce,  passports,  safe-con- 
ducts, truces  or  armistices,  cartels,  etc. 

Chapter   XIX. 

TERMINATION  OF  WAR:  Covei'ing  the  meth- 
ods of  termination,  uti  possidetis,  treaties  of 
peace,  conquest,  etc. 

Chapter   XX. 

OF  NEUTRALITY  IN  GENERAL:  Neutrality 
defined  and  explained. 

Chapter   XXI. 

THE  LAW  OF  NEUTRALITY  BETWEEN  BEL- 
LIGERENT AND  NEUTRAL  STATES:  Cov- 
ering the  rights,  duties,  and  liabilities  of  neutral 
states. 

Chapter   XXII. 

CONTRABAND :    Covering  the  subject  generally. 


BLOCKADE : 


Chapter  XXIII. 

Covering  the  subject  generally. 


Chapter  XXIV. 

VISIT  AND  SEARCH,  AND  RIGHT  OF  AN- 
GARY:   Covering  those  subjects  generally. 

APPENDIX. 

Giving  in  full,  as  in  no  other  single  work,  the  In- 
structions for  the  Government  of  Armies  of  the 
United  States  in  the  Field  (Lieber) ;  Papers  Car- 
ried, or  that  Ought  to  be  Carried,  by  Vessels  in 
Evidence  of  their  Nationality;  The  Declaration 
of  Paris;  The  Declaration  of  St.  Petersburg; 
The  Geneva  Convention  for  the  Amelioration  of 
the  Condition  of  the  Sick  and  Wounded  of  Ar- 
mies in  the  Field;  The  Laws  of  War  on  Land, 
(Recommended  for  Adoption  by  the  Institute  of 
International  Law  at  Oxford,  Sept.  9, 1880) ;  and 
The  Brussels  Conference. 


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(^  ^ax((>^oo^  of 

^pe  San?  of  €ovt^. 

<Ebtj?in  (^.  Sa^^arb,  ®..  Ot.,  &&.  (g., 

Professor  of  the  Law  of  Torts  in  the  Minnesota  University  Law  School. 


TABLE   OF   CONTENTS 
PART  I.— IN   GENERAL. 
Chapter    I. 


GENERAL  NATURE  OF  TORTS :  Covering  the 
law  adjective  and  law  substantive,  distinctions 
between  torts  and  crimes,  common-law  obliga- 
tions and  remedies,  how  and  why  liability  at- 
taches for  torts,  the  mental  element,  connec- 
tion as  cause,  damnum  and  injuria,  common- 
law,  contract  and  statutory  duties,  etc. 

Chapter    II. 

VARIATIONS  IN  THE  NORMAL  RIGHT  TO 
TO  SUE:  Covering  exemptions  based  on 
privilege  of  actor,  as  public  acts  of  states,  of 
judicial  and  executive  officers,  etc.,  and  private 
acts  authorized  by  statute  or  common  law, 
vai-iations  based  on  status  or  conduct  of  plain- 
tiff, ete. 

Chapter  III. 

LIABILITY  FOR  TORTS  COMMITTED  BY  OR 
WITH  OTHERS:  Covering  liability  by  con- 
cert in  action  or  joint  torts,  ?nil  liability  by 
relationship,  as  husband  and  wife,  landlord 
and  tenant,  master  and  servant,  partners,  etc. 

Chapter  IV. 

DISCHARGE  AND  LIMITATION  OF  LIABILI- 
ITY  FOR  TORTS:  Covering  discharge  or 
limitation  by  voluntary  act  of  party  and  by 
operation  of  law. 

Chapter  V. 

REMEDIES:  Covering  statutory  and  common- 
law  remedies,  judicial  and  extrajudicial  reme- 
dies, damages,  etc. 

FART  II.— SPECIFIC  WRONGS. 
Chapter  VI. 

WRONGS  AFFECTING  SAFETY  AND  FREE- 
DOM OF  PERSONS:  Covering  false  impris- 
onment, assault  and  battery,  and  the  defenses, 
as  justification  and  mitigation. 


Chapter  VII. 

INJURIES  IN  FAMILY  RELATIONS:  Cover- 
ing the  lamily  at  common  law.  master  and 
servant,  parent  and  child,  husband  and  wife. 


Chapter  VIII. 

WRONGS  AFFECTING  REPUTATION:  Cover- 
ing libel,  slander,  and  slander  of  title,  together 
with  the  defenses. 

Chapter   IX. 

MALICIOUS  WRONGS:  Covering  deceit,  mali- 
cious prosecution,  abuse  of  process,  interfer- 
ence with  contract,  conspiracy,  etc. 

Chapter  X. 

WRONGS  TO  POSSESSION  AND  PROPERTY: 
Covering  the  nature  of  possession  and  its  ob- 
jects, trespass,  waste,  conversion,  etc. 

Chapter    XI. 

NUISANCE:  Covering  kinds  of  nuisance,  as  pub- 
lic, private,  and  mixed,  continuing  and  legal- 
ized, parties  to  proceedings  against,  remedies, 
etc. 

Chapter   XII. 

NEGLIGENCE:  Covering  the  duty  to  exercise 
care,  what  is  commensurate  care,  common-law, 
contract  and  statutory  duties,  damages,  con- 
tributory negligence,  etc. 

Chapter    XIII. 

MASTER  AND  SERVANT:  Covering  master's 
liability  to  servant  for  negligence,  master's 
duty  to  servant,  assumption  of  risk  by  serv- 
ant, various  kinds  of  risks,  fellow  servants, 
vice  principals,  etc 


Chapter    XIV. 

COMMON    CARRIERS:      Coverin| 
generally. 


the   subject 


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DY     n.     V.^MIVIr'Dtll-I-l-     DL-MV^IX,  TISES  ON   CONSTITUTIONAL  LAW.  JUDGMENTS.  ETa 


TABLE   OF   CONTENTS. 


Chapter  I. 

NATURE  AND  OFFICE  OF  INTERPRE- 
TATION: Coverins  definition  of  terms,  ob- 
ject of  intt'i-pretatiou,  rules  of  construction, 
and  office  of  judiciary. 

Chapter  II. 

CONSTRUCTION  OF  CONSTITUTIONS: 
Covering  method  and  rules  of  construction, 
construction  as  a  whole,  cotumou  law  and  pre- 
vious legislation,  retrosijective  operation,  man- 
datory and  directory  provisions,  preamble  and 
titles,  extraneous  aids,  schedule,  stare  decisis, 
etc. 

Chapter    III. 

GENERAL  PRINCIPLES  OF  STATUTORY 
CONSTRUCTION:  Covering  literal  and  eq- 
uitable consti'uction,  scope  and  pm'pose  of  the 
act,  casus  omissus,  implications  in  statutes, 
meaningless  statutes,  errors,  misprints,  sur- 
plusage, interpolation  of  words,   etc. 

Chapter  IV. 

STATUTORY  CONSTRUCTION;  PRE- 
SUMPTIONS: Covering  presumptions  against 
exceeding  limitations  of  legislative  power,  uu- 
constitutionality,  injustice,  irrepealable  laws, 
implied  repeal  of  laws,  etc.,  presumptions  as 
to  public  policy,  as  to  jurisdiction  of  courts, 
etc. 

Chapter   V. 

STATUTORY  CONSTRUCTION;  WORDS 
AND  PHRASES.  Covering  technical  an.l 
popular  meaning  of  words,  commercial  and 
trade,  general  and  special,  relative  and  qual- 
ifj-ing,  and  permissive  and  mandatory  terms; 
conjunctive  and  disjunctive  particles,  adopted 
and  re-enacted  statutes,  computation  of  time, 
etc. 

Chapter  VI. 

INTRINSIC  AIDS  IN  STATUTORY  CON- 
STRUCTION: Covering  constiiiction  as  a 
whole,  context,  title,  preamble,  interpretation 
clause,  etc. 

Chapter  VII. 

EXTRINSIC  AIDS  IN  STATUTORY  CON- 
STRUCTION: Covering  admissibility  of  ex- 
trinsic aids,  statutes  in  pari  materia,  con- 
temporary history,  construction  and  usage, 
journals  of  legislature,  opinions  of  legislator's, 
etc. 

Chapter    VIII. 

INTERPRETATION  WITH  REFERENCE 
TO  COMMON  LAW:  Covering  statutes  af- 
firming, supplementing,  superseding  or  in 
derogation  of,  common  law. 


Chapter    IX. 

RETROSPECTIVE         INTERPRETATION: 

Covering  definition,  constitutional  considera- 
tions, vested  rights,  remedial  statutes,  and 
statutes  regulating  procedure. 

Chapter    X. 

CONSTRUCTION  OF  PROVISOS,  EXCEP- 
TIONS, AND  SAVING  CLAUSES:  Cov- 
ering the  subject  generally. 

Chapter    XI. 

STRICT  AND  LIBERAL  CONSTRUCTION: 
Covering  penal  and  remedial  statutes,  stat- 
utes against  common  right,  against  frauds, 
and  of  limitation,  legislative  grants,  revenue 
and  tax  laws,  etc. 

Chapter  XII. 

MANDATORY  AND  DIRECTORY  PROVI- 
SIONS: Definitions  and  rules  covering  the 
subject  generally. 

Chapter   XIII. 

AMENDATORY  AND  AMENDED  ACTS: 

Covering  construction  of  amendments  and  of 
statute  as  amended,  identification  of  act  to  be 
amended,  amendment  by  way  of  revision,  etc. 

Chapter   XIV. 

CONSTRUCTION  OF  CODES  AND  RE- 
VISED STATUTES:  Covering  construction 
as  a  whole,  reference  to  original  statutes, 
change  of  language,  previous  judicial  construc- 
tion, etc. 

Chapter   XV. 

DECLARATORY  STATUTES:  Covering  defi- 
nition and  construction  in  general. 

Chapter   XVI. 

THE  RULE  OF  STARE  DECISIS  AS  AP- 
PLIED TO  STATUTORY  CONSTRUC- 
TION: Covering  the  general  principle,  re- 
versal of  construction,  federal  courts  follow- 
ing state  decisions,  construction  of  statutes  of 
other  states,  etc. 

Chapter   XVII. 

INTERPRETATION  OF  .TUDICTAL  DECI- 
SIONS AND  THE  DOCTRINE  OF  PREC- 
EDENTS: Cohering  tlie  nature  of  prece- 
dents; dicta;  stare  decisis;  the  force  of  prece- 
dents as  between  different  courts;  the  law  of 
the  case,  etc. 


1    VOLUME. 


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TABLE    OF    CONTENTS. 


Chapter  I. 

IN  GENERAL:  Covering  definition  and  gen- 
eral principles  common  to  all  bailments; 
classification    of    bailments. 

Cliapter  II. 

BAILMENTS  FOR  SOLE  BENEFIT  OF 
BAILOR:  Covering  depositum  and  man- 
datum,  creation,  rights  and  liabilities  of 
parties,   termination,    etc. 

Chapter   III. 

BAILMENTS  FOR  BAILEE'S  SOLE  BEN- 
EFIT: Commodatum,  creation,  rights  and 
liabilities  of  parties,  termination,  etc. 


Chapter  IV. 

BAILMENTS  FOR  MUTUAL  BENEFIT- 
PLEDGES:  Covering  definition  of  pledge, 
creation,  title  of  pledgor,  rights  and  liabil- 
ities of  parties  before  and  after  default,  ter- 
mination, etc. 

Chapter    V. 

BAILMENTS  FOR  MUTUAL  BENEFIT- 
HIRING:  Locatio  or  hiring  defined;  estab- 
lishment of  relation;  rights  and  liabilities 
of  parties;  hiring  of  things  for  use;  hire  of 
labor  and  services;  warehousemen;  wharf- 
ingers; safe-deposit  companies;  factors,  etc.; 
termination  of  relation,  etc. 


Chapter  VI. 

INNKEEPERS:  Innkeeper  defined;  who  are 
guests;  commencement  of  relation;  duty 
to  receive  guest;  liability  for  guests'  goods; 
lien;  termination  of  relation;  liability  as 
ordinary  bailee,  etc. 

Chapter  VII. 

CARRIERS  OF  GOODS:  Common  carriers, 
essential  characteristics;  when  liability  at- 
taches; discrimination;  compensation;  lien; 
liability  as  insurers  and  as  ordinary  bailees; 
carriers  of  live  stock;  carriers  of  baggage; 
contracts  and  notices  limiting  liability;  ter- 
mination of  liability;  connecting  carriers, 
etc.;  post-oSice  department;  private  car- 
riers. 

Chapter    VIII. 

CARRIERS  OF  PASSENGERS:  Who  are 
passengers;  when  liability  attaches;  duty 
to  accept  passengers;  furnishing  equal  ac- 
commodations; ticket  as  evidence  of  pas- 
senger's rights;  right  to  make  regulations; 
injuries  to  passengers;  contracts  limiting 
liability;  termination  of  liability;  ejection 
from  vehicle:  connecting  carriers,  and  cov- 
ering the  suliject  generally. 

Chapter    IX. 

ACTIONS  AGAINST  CARRIERS:  Actions 
against  carriers  of  goods  and  carrier.s  of 
passengers;  parties;  form  of  action;  plead- 
ing;   evidence;    damages. 


1  VOLUME.     675  PAGES.     $3.75,  DELIVERED. 


WEST  PUBLISHING  CO.,  St.  Paul,  Minn. 

C995  (13) 


t^c  j^om6oofi  §cms,) 


♦  ♦(VV** 


(gj  Rafter  ©enton  ^mtt^, 

Instructor  in  the  Law  Department  of  the  University  ol   Michigan. 


TABLE   OF   CONTENTS. 


Pari  I— ELEMENTARY  JURISPRUDENCE. 

CHAPTER   I. 

NATURE  OF  LAW  AND  THE  VARIOUS  SYSTEMS: 
Moral,  divine,  municipal,  international,  mari- 
time and  martial  law. 

CHAPTER    n. 

GOVERNMENT  AND  ITS  FUNCTIONS:  Covering 
sovereignty,  the  state,  the  constitution,  and  the 
forms  and  functions  of  government  generally. 

CHAPTER    III. 

GOVERNMENT  IN  THE  UNITED  STATES:  Its 
general  character,  sovereignty,  distribution  of 
powers,   citizenship,   etc. 

CHAPTER   IV. 

THE  UNWRITTEN  LAW:  The  Roman,  the  Canon 
and  the  Common  law. 

CHAPTER   V. 

EQUITY:  Nature  and  jurisdiction  of  equity;  max- 
ims. 

CHAPTER    VI. 

THE  WRITTEN  LAW:  Relation  to  unwritten  law; 
statutory  law  in  general. 

CHAPTER    VII. 

THE  AUTHORITIES  AND  THEIR  INTERPRETA- 
TION: The  rank  of  authorities,  rules  of  inter- 
pretation,  statutory  construction,   etc. 

CHAPTER    VIII. 

PERSONS  AND  PERSONAL  RIGHTS:  Lepal 
rights,  wrongs  and  remedies,  rights  in  rem  and 
In  personam,  status,  personal  security,  liberty, 
property,   constitutional  guaranties,  etc 

CHAPTER  IX. 

PROPERTY:  Covering,  ownership  and  possession; 
the  Feudal  system;  corporeal  and  incorporeal, 
real  and  personal,   property;     fixtures,    etc. 

CHAPTER    X. 

CLASSIFICATION  OF  THE  LAW:  Substantive 
ajid  adjective,  public  and  private  law,  etc. 

Pari  II— THE  SUBSTANTIVE  LAW. 

CHAPTER    XI. 

CONSTITUTIONAL  AND  ADMINISTRATIVE  LAW: 
Written  and  unwritten  constitutions,  essentials 
and  construction  of  constitutions;  administra- 
tive law,  etc 

CHAPTER    XII. 

CRIMINAL  LAW:  Covering  its  general  nature, 
criminal  capacity,  classification  of  crimes,  pun- 
ishment,  etc. 

CHAPTER    XIII. 

THE  LAW  OF  DOMESTIC  RELATIONS:  Cover- 
ing marriage  and  Its  incidents,  parent  and  child, 
guardian  and  ward,   master  and  servant,   etc. 


CHAPTER    XIV. 

CORPOREAL  AND  INCORPOREAL  HEREDITA- 
MENTS:   Covering   the   subject   generally. 

CHAPTER   XV. 

ESTATES  IN  REAL  PROPERTY:  Classification, 
estates  In  possession  and  In  expectancy ;  free- 
holds and  estates  less  than  freehold;  estates  in 
severalty,  in  joint  tenancy  and  in  common;  ab- 
solute and  conditional,  legal  and  equitable  es- 
tates ;     etc 

CHAPTER    XVI. 

TITLES  TO  REAL  PROPERTY:  Covering  title  by 
descent  and  by  purchase,  classification  and 
forms  of  deeds,  etc. 

CHAPTER    XVII. 

PERSONAL  PROPERTY:  Real  and  personal  chat- 
tels, ownership  of  personal  property,  acquisition 
of  title,   etc. 

CHAPTER   XVIII. 

SUCCESSION  AFTER  DEATH:  Testate  and  intes- 
tate succession,  escheat,  executors  and  adminis- 
trators,   etc. 

CHAPTER    XIX. 

CONTRACTS:  Definition,  validity  and  classification 
of  contracts,  quasi  contracts,  etc 

CHAPTER   XX. 

SPECIAL  CONTRACTS:  Covering  contracts  of 
sale,  bailments,  negotiable  contracts,  suretyship, 
insurance,    etc 

CHAPTER    XXI. 

AGENCY:    Covering  the  subject  generally. 

CHAPTER    XXII. 

COMMERCIAL  ASSOCIATIONS:  Covering  part- 
nerships, joint  stock  companies,  voluntary  asso- 
ciations,   corporations,    etc 

CHAPTER   XXIII. 

TORTS:  Covering  the  nature  and  elements  of  torts, 
proximate  and  remote  cause  and  specific  torts. 

Part  III— THE  ADJECTIVE  LAW. 

CHAPTER    XXIV. 

REMEDIES:  Extralegal  and  legal,  penal  and  civil, 
common  law  and  equitable,  ordinary  and  extraor- 
dinary  remedies. 

CHAPTER    XXV. 

COURTS  AND  THEIR  JURISDICTION:  Covering 
the  subject  generally. 

CHAPTER    XXVI. 

PROCEDURE:  In  general;  outlines  of  common 
law,  equity,  code,  and  criminal  procedure. 

CHAPTER    XXVII. 

TRIALS:    Early  forms,   trial  procedure,  evidence. 


1   VOL.     367    PAGES.     S3. 75,   DELIVERED. 


WEST 

C1112 


PUBLISHING    CO., 

(14) 


St.  Paul,  Minn. 


(S5e  J^ornSooR  ^eriee.) 


(^  ganbfiooft  of 

Cpe  Saw  of  ©ama^e^; 

Author  of  "Bailments  and  Carriers.** 


TABLE    OF    CONTENTS. 


CHAPTER   L 

DEFINITIONS  AND  GENERAL,  PRINCIPLES: 
Definition,  nature  and  theory  of  damages; 
wrong  and  damage;  analysis  of  legal  wrongs; 
classiflcation   of   damages. 

CHAPTER    rL 

NOMINAL  DAMAGES:  Definition  and  general  na- 
ture. 

CHAPTER   III. 

COMPENSATORY  DAMAGES:  Definition;  proxi- 
mate and  remote  consequences;  direct  and  con- 
sequential losses;  avoidable  consequences;  cer- 
tainty of  damages;  profits;  entirety  of  demand; 
past  and  future  losses;  elements  of  compensa- 
tion; aggravation  and  mitigation  of  damages; 
reduction  of  loss;  injuries  to  limited  interests, 
etc 

CHAPTER   IV. 

BONDS,  LIQUIDATED  DAMAGES  AND  ALTERNA- 
TIVE CONTRACTS:  Covering  the  subject  gen- 
erally. 

CHAPTER   V. 

INTEREST:  Definition;  as  a  debt  and  as  damages; 
interest  on  liquidated  and  unliquidated  de- 
mands; on  overdue  paper, — contract  and  stat- 
ute  rate;    compound  interest;     etc. 

CHAPTER   VI. 

VALUE:  Definition;  how  estimated;  market  value; 
pretium  affectionis;  value  peculiar  to  owner; 
time  and  place  of  assessment;  highest  Interme- 
diate  value;     etc. 

CHAPTER    VII. 

EXEMPLARY  DAM.A.GES:  In  general;  when  re- 
coverable; liability  of  principal  for  act  of  agent; 
etc. 

CHAPTER   Vm. 

PLEADING  AND  PRACTICE:  Allegation  of  dam- 
age, the  ad  damnum,  form  of  statement,  prov- 
ince of  court  and  jury,  etc. 


CHAPTER  IX. 

BREACH  OP  CONTRACTS  FOR  SALE  OF  GOODS: 
Damages  In  action  by  seller  for  non-acceptanc« 
and  non-payment;  damages  in  action  by  buyer 
for  non-delivery,  breach  of  warranty,  and  as  for 
conversion. 

CHAPTER    X. 

DAMAGES  IN  ACTIONS  AGAINST  CARRIER: 
Carriers  of  goods, — refusal  to  transport,  non- 
delivery. Injury  in  transit,  delay,  consequential 
damages;  carriers  of  passengers, — injuries  to 
passenger  exemplary  damages,  mental  sufiering. 
delay,  wrongful  ejection,  etc. 

CHAPTER    XI. 

DAMAGES  IN  ACTIONS  AGAINST  TELEGRAPH 
COMPANIES:  Actions  by  sender  and  by  receiv- 
er; proximate  and  certain,  remote  and  specula- 
tive damages;  notice  of  purpose  and  importance 
of  message;  cipher  messages;  avoidable  conse- 
quences;   exemplary  damages;    etc. 


CHAPTER    XII. 

DAMAGES  FOR  DEATH  BY  WRONGFUL  ACT: 
Pecuniary  losses;  mental  suffering:  exemnlary 
damages;  Injury  to  deceased;  medical  and  fu- 
neral expenses;  meaning  of  pecuniary, — care  and 
support,  prospective  giits  and  inheritances;  in- 
terest as  damages;  discretion  of  jury;  nominal 
damages,    etc 

CHAPTER    XIII. 

WRONGS  AFFECTING  REAL  PROPERTY:  Dam- 
ages for  detention  of  real  property;  trespass; 
nuisance;  waste;  contract  to  sell  real  property, 
— breach  by  vendor  or  vendee;  breach  of  cove- 
nants,   etc. 

CHAPTER    XIV. 

BREACH  OF  MARRIAGE  PROMISE:  In  general, 
compensatory   damages,    exemplary   damages,  etc 


1  VOL     476  PAGES.     $3.75,  DELIVERED. 


WEST  PUBLISHING  CO.,  St.  Paul,  Minn. 

Cllll  .  (15) 


{Z^  ^omBooft  M^vUs.) 


(§  ganbBooft  of 

t^c  Saw  of  (Keaf  (proper(g. 

(gg  (Earf  (]p.  jgo^jRins,  (^.  (g.,  EE.  (JU. 


TABLE   OF   CONTENTS. 


Chapter   I. 

WHAT   IS   REAL   PROPERTY:      Real   and 

personal  property,  fixtures,  equitable  conver- 
sion, personal  interests  in  land. 

Chapter    H. 

TENURE  AMD  SEISIN. 

Chapter  III. 

ESTATES  AS  TO  QUANTITY— FEE  SIM- 
PLE: Classification  of  estates,  freehold, 
fee-simple,  creation,  right  of  user  and  aliena- 
tion. 

Chapter  IV. 

ESTATES  AS  TO  QUANTITY  (Continued)— 
ESTATES  TAIL:  Classes,  origin,  crea- 
tion, incidents,  duration,  tenant  in  tail  aft- 
er possibility  of  issue  extinct,  estates  tail  in 
the  United  States,  quasi  entail. 

Chapter  V. 

ESTATES  AS  TO  QUANTITY  (Continued)- 
CONVENTIONAL  LIFE  ESTATES: 
Life  estates,  creation,  conventional  life  es- 
tates, incidents,  estates  per  autre  vie. 

Chapter  VI. 

ESTATES  AS  TO  QUANTITY  (Continued)— 
LEGAL  LIFE  ESTATES:  Estate  during 
coverture,  curtesy,  dower,  homestead,  fed- 
eral homestead  act. 

Chapter  VII. 

ESTATES  AS  TO  QUANTITY  (Continued)— 
LESS  THAN  FREEHOLD:  Estates  for 
years,  letting  land  on  shares,  tenancies  at 
will,  tenancies  from  year  to  year,  letting  of 
lodgings,  tenancies  at  sufferance,  licenses. 

Chapter    VIII. 

ESTATES  AS  TO  QUALITY  ON  CONDI- 
TION—ON LIMITATION:  Estates  on 
condition,  estates  on  limitation,  base  fees. 

Chapter    IX. 

ESTATES  AS  TO  QUALITY  (Continued)— 
MORTGAGES:  Parties.  nature.  form, 
rights  and  liabilities  of  mortgagor  and  mort- 
gagee, assignment  of  the  equity  of  redemp- 
tion, assignment  of  the  mortgage,  priority 
of  mortgages  and  other  conveyances,  regis- 
tration, discharge  of  a  mortgage. 


Chapter    X. 

EQUITABLE  ESTATES:  Statute  of  nses, 
classification  of  trusts, — exj)ress,  implied, 
resulting,  constructive, — incidents  of  equita- 
ble estates,  charitable  trusts. 

Chapter    XI. 

ESTATES  AS  TO  TIME  OF  ENJOYMENT 
—FUTURE  ESTATES:  Reversions,  possi- 
bilities of  reverter,  remainders,  rule  in  Shel- 
ley's Case,  future  uses,  springing  uses, 
shifting  uses,  executory  devises,  incidents 
of  future  estates. 

Chapter  XII. 

ESTATES  AS  TO  NUMBER  OF  OWNERS 
—JOINT  ESTATES:  Joint  tenancies,  ten- 
ancies in  common,  estates  in  coparcenary, 
estates  in  entirety,  estates  in  partnership, 
incidents  of  joint  estates,  partition. 

Chapter    XIII. 
INCORPOREAL   HEREDITAMENTS: 

Easements,  creation,  classification,  inci- 
dents, destruction,  rights  of  way,  highways, 
light  and  air,  lateral  and  subjacent  sup- 
port, party  walls,  easements  in  water,  prof- 
its a  prendre,  rents,  franchises. 

Chapter   XIV. 

LEGAL  CAPACITY  TO  HOLD  AND  CON- 
VEY REALTY:  Infants,  persons  of  un- 
sound mind,  married  women,  aliens,  corpo- 
rations. 

Chapter   XV. 

RESTRAINTS  ON  ALIENATION:  Re- 
straints imposed  by  law,  restraints  in  favor 
of  creditors,  restraints  imposed  in  creation 
of  estate. 

Chapter    XVI. 

TITLE:  Acquisition  of  title  by  state  and  pri- 
vate persons,  grant  from  state,  conveyan- 
ces, common-law  conveyances,  conveyances 
under  statute  of  uses,  modern  statutory  con- 
veyances, registered  titles,  requisites  of 
deeds;  covenants  for  title,  seisin,  ajrainst 
incumbrances,  warranty,  further  assurance; 
estoppel,  adverse  possession,  accretion,  de- 
vise, descent,  judicial  process;  conveyances 
under  licenses,  under  duress;  tax  titles,  em- 
inent domain. 


1  VOL..     589  PAGES.     $3.75,  DELIVERED. 


WEST  PUBLISHING  CO.,  St.  Paul,  Minn. 


C1191a 


(16) 


(^  §anb6oog  of 
Cpe  Bati?  of  (pet0on0  ani  ©omeeh'c  (RePafton^, 

(J0g  OTafter  C.  ^tffang. 


TABLE    OF 


PART  I. 


HUSBAND  AND  WIFE. 
Chapter    I. 

MARRIAGE:  CoTcring  definition  and  essen- 
tials; capacity  of  parties;  reality  of  con- 
sent; formalities  in  celebration;  annul- 
ment and  avoidance;  validating  acts;  con- 
flict of  laws,  etc. 

Chapter   II. 

PERSONS  OF  THE  SPOUSES  AS  AF- 
FECTED BY  COVERTURE:  Covering 
rights  inter  se;  crimes  and  torts  of  married 
women;  crimes  and  torts  as  between  hus- 
band and  wife;  torts  against  married  wo- 
men; actions  for  alienation  of  affections; 
crim.  con.,  etc. 

Chapter  III. 

RIGHTS  IN  PROPERTY  AS  AFFECTED 
BY  COVERTURE:  Covering  wife's  earn- 
ings; wife's  choses  in  action  and  in  posses- 
sion; wife's  chattels  real;  administration 
of  wife's  estate;  equitable  and  statutory 
separate  estate;  community  property;  cur- 
tesy;   dower;    estates  by  the  entirety,   etc. 

Chapter  IV. 

CONTRACTS,  CONVEYANCES,  ETC., 
AND  QUASI-CONTRACTUAL,  OBLI- 
GATIONS: Covering,  inter  alia,  husband's 
liability  for  wife's  necessaries,  antenuptial 
debts,  and  funeral  expenses;  wife  as  a  sole 
trader;  wife  a.s  husband's  agent;  convey- 
ances, sales,  and  gifts  by  the  wife,  etc. 

Chapter  V. 

WIFE'S  EQUITABLE  AND  STATUTORY 
SEPARATE  ESTATE:  Covering  their 
nature;  jus  disponendi;  power  to  charge  by 
contract,  etc. 

Chapter  VI. 

ANTENUPTIAL  AND  POSTNUPTIAL. 
SETTLEMENTS:  Covering  the  subject 
generally,  including  marriage  as  a  consid- 
eration; the  statute  of  frauds;  validity 
against  creditors  and  purchasers,  etc. 

Chapter  VII. 

SEPARATION  AND  DIVORCE:  Covering 
agreements  for  separation;  jurisdiction  to 
grant  divorce;  grounds  for  divorce;  de- 
fenses in  actions  for  divorce;  legislative  di- 
vorce, etc. 

PART  II. 
PARENT  AND  CHILD, 
Chapter    VIII. 
LEGITIMACY,      ILLEGITIMACY,      AND 
ADOPTION:    Covering  legitimacy  of  chil- 
dren; adoption  of  children;  status  of  illegiti- 
mate children. 


CONTENTS. 

Chapter   IX. 

DUTIES  AND  LIABILITIES  OF  PAR- 
ENTS: Maintenance,  protection,  and  edu- 
cation of  child;  allowajice  out  of  child's 
estate;  child  as  parent's  agent;  parent's  lia- 
bility for  crimes  and  torts  of  cliild,  etc. 

Chapter    X. 

RIGHTS  OF  PARENTS  AND  OF  CHILr 
DRF]N:  Right  to  custody;  service  and 
earnings  of  child;  correction  of  child; 
pmancii)ation  of  children;  action  by  parent 
for  injuries  to  child;  gifts,  contracts,  and 
conveyances  between;  advancements;  duty 
to  support  parent;    domicile  of  child,  etc. 

PART  III. 

GUARDIAN  AND  WARD. 
Chapter    XI. 

GUARDIANS  DEFINED  —  SELECTION 
AND  APPOINTMENT:  Covering  natural 
guardians;  testamentary  guardians;  statu- 
tory guardians;  guardians  by  estoppel; 
guardians  of  insane  persons;  guardians  ad 
litem,  etc. 

Chapter  XII. 

RIGHTS.  DUTIES,  AND  LIABILITIES  OP 
GUARDIANS:  Right  to  custody  and  serv- 
ices of  ward;  maintenance  of  ward;  change 
of  ward's  domicile;  management  of  ward's 
estate;  foreign  guardians;  inventory  and 
accounts;  compensation  of  guardian;  "trans- 
actions between  guardian  and  ward,  etc. 

Chapter    XIII. 

TERMINATION  OF  GUARDIANSHIP  — 
ENFORCING  GUARDIAN'S  LIABILI- 
TY:   Covering  the  subject  generally. 

PART  IV. 

INFANTS,    PERSONS    NON    COMPOTES 

MENTIS,  AND  ALIENS. 

Chapter    XIV. 

INFANTS:  Covering  contracts  of  infants,  in- 
cluding ratification  and  disaffirmance;  lia- 
bilities for  necessaries,  etc.;  capacity  to 
hold  office,  to  make  a  will,  and  as  witness- 
es; liability  for  torts  and  crimes;  infanta 
as  parties  to  actions,  etc. 

Chapter    XV. 

PERSONS  NON  COMPOTES  MENTIS 
AND  ALIENS:  Covering  insane  and 
drunken  persons,  their  contracts,  their  lia- 
bility for  torts  and  crimes  and  testament- 
ary capacity,  etc. 

PART  V. 

MASTER  AND  SERVANT. 
Chapter    XVI. 

CREATION  AND  TERMINATION  OF  RE- 
LATION: Remedies  for  broach  of  con- 
tract; rights  and  duties  and  liabilities  inter 
88  and  as  to  third  persons,  etc 


CI  243 


1   VOLUME.     589  PAGES.     $3.75,  DELIVERED. 


WEST  PUBLISHING  COMPANY,  ST.  PAUL,  MINN. 

(17) 


(3n  f^c  j^ornfiocfi  ^cnee.) 


H  treatise  on 


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By  Simon  Greenleaf  Croswell, 


Auth»)r  €)f  •'  ICIectricily," 
"I'atent  Cases,"  etc. 


TABLE  OF  CONTENTS. 


Pari  I.— DEFINITIONS  AND  DIVISION  OF  SUBJECT. 

Chapter   I. 

DEFINITIONS  AND  DIVISION  OF  SUBJECT:  Ex- 
ecutors and  administrators  defined;  analysis  of 
book. 


Pari  11.— APPOINTMENT  AND  QUALIFICATIONS. 

Chapter   II. 

APPOINTMENT  IN  COURT:  Necessity  of  adminis- 
tration; necessity  of  appointment  by  court;  ju- 
risdiction; conclusiveness  of  decrees  of  probate 
courts,   etc. 

Chapter  III. 

PLACE  AND  TIME  OF  APPOINTMENT  AND  REQ- 
UISITES THEREFOR:  Place  of  appointment; 
property  necessary  to  give  jurisdiction;  time  limit 
for  application. 

Chapter  IV. 

WHO  MAY  CLAIM  APPOINTMENT  AS  EXECU- 
TOR: Designation  in  will;  appointment  by  dele- 
gation; executor  of  executor;  non-assignability 
of  office. 

Chapter  V. 

WHO  MAY  CLAIM  THE  RIGHT  TO  ADMINISTER: 
Principle  which  governs  the  right;  order  of  pre- 
cedence; creditors;  preferences  among  kindred 
etc. 

Chapter  VI. 

DISQUALIFICATIONS  FOR  THE  OFFICE  OF  EX- 
ECUTOR OR  ADMINISTRATOR:  Infants,  mar- 
ried women,  Idiots,  lunatics,  convicts,  corpora- 
tions; poverty  and  insolvency;  absolute  and  dis- 
cretionary Incompetency,  etc. 


Chapter  VII. 

ACCEPTANCE    OR    RENUNCIATION: 
Implied  renunciation. 


Express    or 


Chapter  VIII. 

PROCEEDINGS  FOR  APPOINTMENT  OP  EXECU- 
TORS AND  ADMINISTRATORS:      In  general. 

Chapter  IX. 

SPECIAL  KINDS  OF  ADMINISTRATIONS:  Admin- 
istration cum  testamento  annexo;  de  bonis  non; 
during  minority;  pendente  lite;  public  adminis- 
trator;   executor  de  son  tort,  etc. 

Chapter  X. 

FOREIGN  AND  INTERSTATE  ADMINISTRATION: 
Validity  of  fpreign  wills;  territorial  limit  of  va- 
lidity of  letters;  principal  and  ancillary  adminis- 
tration;   conflict  of  laws;    comity,  etc. 

Chapter  XI. 

JOINT  EXECUTORS  AND  AD.MINISTRATORS:  Na- 
ture of  estate;  rights,  powers  and  liabilities;  rem- 
edies between,  etc. 

Chapter  XII. 

ADMINISTRATION  BONDS:  Covering  the  subject 
generally. 


Part  III.— POWERS  AND  DUTIES. 

Chapter  XIII. 

INVENTORY— APPRAISEMENT— NOTICE  OF  AP- 
POINTMENT:   Covering  the  subject  generally. 

Chapter  XIV. 

ASSETS  OF  THE  ESTATE:  What  are  assets;  (Ix- 
tures;  emblements;  animals;  ownership  at  time  of 
death,   etc. 

Chapter  XV. 

MANAGEMENT  OF  THE  ESTATE:  Rights  and  lia- 
bilities of  executors  or  administrators;  collection 
and  Investment  of  assets,   taxation,   etc. 

Chapter   XVI. 

SALES  AND  CONVEYANCES  OF  PERSONAL  OR 
REAL  ASSETS:  Covering  sales  in  general,  sales 
of  land  to  pay  debts,   power  to  mortgage,   etc. 

Chapter  XVII. 

PAYMENT  OF  DEBTS  AND  ALLOWANCES— IN- 
SOLVENT ESTATES:  Covering  priority  of  debts, 
widow's  allowance,  expenses  of  funeral  and  last 
illness,  costs  of  administration;  presentation  and 
allowance  of  claims,  insolvent  estates,  etc. 

Chapter  XVIII. 

PAYMENT  OF  LEGACIES:  Legacies  subordinate  to 
debts;  ademption  and  abatement  of  legacies; 
priority  between  legacies  and  contingent,  future 
or  unknown  debts;    payment  of  legacies.  Interest, 

Chapter  XIX. 

DISTRIBUTION  OF  INTESTATE  ESTATES:  Order. 
time  and  mode  of  distribution;  rights  of  husband, 
widow  and  next  of  kin,  right  of  presentation, 
payment  of  distributive  share,  etc. 

Chapter  XX. 

ADMINISTRATION  ACCOUNTS:  Time  and  manner 
of  accounting,  charges  and  allowances  in  account; 
,  commissioiis  and  compensation,  etc. 

Part  IV.— TERMINATION  OF  OFFICE. 

Chapter  XXI. 

REVOCATION  OF  LETTERS— REMOVAL— RESIG- 
NATION:   Covering  the  subject  generally. 

Part  v.— REMEDIES. 

Chapter  XXII. 

ACTIONS  BY  EXECUTORS  AND  ADMINISTRA- 
TORS: Power  to  sue  before  probate  or  grant  of 
letters;  survival  of  actions;  actions  in  personal 
and  representative  capacity,  etc. 

Chapter  XXlII. 

ACTIONS  AGAINST  EXECUTORS  AND  ADMIN- 
ISTRATORS:   Survival  of  actions;  particular  lla- 

1  bilities;  attachment  and  garnishment;  Judgments, 
executions  and  other  proceedings;  order  of  liabil- 
ity of  assets;  suits  on  bonds,  etc. 

Chapter  XXIV. 

STATUTE    OF    LPnTATTONS— SET-OFF:    General 
I       and  special  statute  of  limitations,  set-off,  etc. 

Chapter  XXV. 

EVIDENCE  AND  COSTS:  Covering  the  subject 
generally. 


I  Vol.    696  Pages. 
S3-75»  Net,  Delivered. 

C1395 


me$t  Publisbiiid  €0.,  $t.  Paul,  minn. 


(18) 


t^t  ^rn£oofi  ^ertes. 


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^Pe  Bat»  of  (|)rit?a^e  Cor^jora^ione, 

By  Wn.  L.  CLARK,  Jr., 

Author  of  "Criminal  Law,"  "Criminal  Procedure,"  and  "Contracts." 


TABLE  OF  CONTENTS. 


Chapter  I. 

OF  THE  NATURE  OF  A  CORPORATION: 
Definition  and  creation;  limited  powers;  attri- 
butes and  incidents;  corporation  as  a  person, 
citizen,  etc. ;  kinds  of  corporations,  etc. 

Chapter  II. 

CREATION  AND  CITIZENSHIP  OF  CORPO- 
RATIONS: Covering  the  subject  generally,  in- 
cluding power  to  create;  general  and  special 
laws;  ratification  of  claim  to  corporate  exist- 
ence; agreement  between  corporation  and  state 
— acceptance  of  charter;  agreement  between 
corporators  and  corporation ;  purpose  of  incorpo- 
ration; corporate  name,  residence,  and  citizen- 
ship of  corporation ;  extension  of  charter;  proof 
of  corporate  existence,  etc. 

Chapter  III. 

EFFECT  OF  IRREGULAR  INCORPORATION: 
Corporations  de  facto;  estoppel  to  deny  corpo- 
rate existence;  liability  of  stockholders  as  part- 
ners. 

Chapter  IV. 

RELATION  BETWEEN  CORPORATION  AND 
ITS  PROMOTERb:  Liability  for  expenses  and 
services  of  promoters;  liability  on  contract  by 
promoters;  liability  of  promoters  to  corporation 
and  stockholders,  etc. 

Chapter  V. 

POWERS  AND  LIABILITIES  OF  CORPORA- 
TIONS: Express  and  implied  powers;  con- 
struction of  charter;  power  to  hold  realty ;  con- 
tracts and  conveyances,  etc. 

Chapter  VI. 

POWERS  AND  LIABILITIES  OF  CORPORA- 
TIONS (Continued) :    The  doctrine  of  ultra  vires. 

Chapter  VII. 

POWERS  AND  LIABILITIES  OF  CORPORA- 
TJ'JiSS  (Continued):  Responsibility  for  torts 
and  crimes;  contempt  of  court. 

Chapter  VIII. 

THE  CORPORATION  AND  THE  STATE: 
Charter  as  a  contract ;  police  power  of  the  state ; 
power  of  eminent  domain;  repeal  and  amend- 
ment of  charter;  taxation  of  corporation. 


Chapter  IX. 

DISSOLUTION  OF  CORPORATIONS:  How  ef- 
fected; equity  jurisdiction;  effect  of  dissolur 
tion,  etc. 

Chapter  X. 

MEMBERSHIP  IN  CORPORATIONS:  Capital 
stock  and  capital;  nature  of  corporate  shares; 
certificates  of  stock;  subscriptions  to  stock;  re- 
lease and  discharge  of  subscriber,  etc.,  covering 
the  subject  generally. 

Chapter  XI. 

MEMBERSHIP  IN  CORPORATIONS  (Contin- 
ued) :  Right  to  inspect  books  and  papers;  right 
to  vote;  profits  and  dividends;  increase  of  cap- 
ital; preferred  stock;  watered  and  bonus  stock; 
action  by  stockholders  for  injuries  to  corpora- 
tion ;  expulsion  of  members,  etc. 

Chapter  XII. 

MEMBERSHIP  IN  CORPORATIONS  (Contin- 
ued) :     Covering  transfer  of  shares. 

Chapter  XIII. 

MANAGEMENT  OF  CORPORATIONS— OFFI- 
CERS AND  AGENTS:  Powers  of  majority  of 
stockholders;  by-laws;  stockholders'  meetings; 
election  and  appointment  of  officers  and  agents: 
powers  and  liabilities  of  officers  and  agents;  re- 
moval of  officers  and  agents,  etc.,  covering  the 
subject  generally. 

Chapter  XIV. 

RIGHTS  AND  REMEDIES  OF  CREDITORS: 
Relation  between  creditors  and  the  corporation, 
covering,  inter  alia,  pi'operty  subject  to  execu- 
tion; assets  as  a  trust  fund  for  creditors;  fraud- 
ulent conveyances;  assignment  for  benefit  of 
creditors;  preferences;  dissolution,  injunction, 
and  receivers;  relation  between  creditors  and 
stockholders,  covering,  inter  alia,  statutory  lia- 
bility of  stockholders;  contribution  between 
stockholders,  etc. ;  relation  between  creditors 
and  officers,  covering  preferences  to  officers  who 
are  creditors;  statutory  liability  of  officers. 

Chapter  XV. 

FOREIGN  CORPORATIONS:  Covering  the  sub- 
ject generally. 

APPENDIX. 
The  logical  conception  of  a  corporation. 


I  Volume.     740  pages.     $3.75,  net,  delivered. 


West  Publishing  Co,,  St.  Paul,  Minn. 

C1479  (10) 


Hi  J^'"^"^^  #crie«. 


(g  j^anbBooft  of 

S^e  Sati?  of  (par^nere^ip 


gig  nX'iffiam  <Beora;e. 


TABLE  OF  CONTENTS. 


Chapter   I. 

DEFINITION  AND  ESTABLISHMENT  OF 
RELATION:  What  constitutes  a  partner- 
ship; tests  of  intention;  sharing  profits;  pro- 
moters of  corporations;  defective  coriiora- 
tion;  delectus  personarum;  subpartuers>hips; 
holding  out,  etc. 

Chapter   II. 

KINDS  OF  PAKTNERSHIPS  AND  PART- 
NERS: Classification  of  partnerships  and 
partners;  universal,  general,  and  special  part- 
nershi|ts;  limited  partnerships;  joint-stock 
companies;  mining  partnerships;  trading 
and  nontrading  partnerships,  etc. 

Chapter  III. 

CHARACTERISTIC  FEATURES         OF 

PAiri^^ERSHIPS:  Legal  and  mercantile 
view  of  a  firm;  partnership  name;  partner- 
ship property;  partnership  capital;  shares  in 
partnerships,  etc. 

Chapter  IV. 

IMPLIED  RIGHTS  AND  LIABILITIES  IN- 
TER SE:  Participation  in  management; 
rights  and  powers  of  majority;  duty  to  ex- 
ercise care,  skill,  and  good  faith;  right  1o 
compete  with  firm:  compensation  for  serv- 
ices; interest  on  balances;  partner's  lien; 
division  of  profits,  etc. 

Chapter  V. 

ARTICLES  OF  PARTNERSHIP:  Purpose 
and  effect;  rules  of  construction;  usual 
clauses  in  articles,  etc.;  covering  the  subject 
generally. 

Chapter  VI. 

RIGHTS  AND  LIABILITIES  AS  TO 
THIRD  PERSONS:  Express  and  implied 
authority  of  partner  to  bind  firm;  particu 
lar  powers;  liability  of  partners  to  thirfl 
persons;  Incoming  i)artners;  assumption  of 
debts;  rights  in  firm  and  separate  property, 
etc. 


Chapter  VII. 

ACTIONS  BETWEEN  PARTNERS:  Action 
on  partnership  claim  or  liability,  at  law,  in 
equity,  or  under  the  code;  actions  between 
firms  with  a  common  member:  actions  on 
individual  obligations;  equitable  actions  io 
general;  accounting  and  dissolution;  spe- 
cific performance;    injunction;    receivers,  etc. 


Chapter   VIII. 

ACTIONS  BETWEEN  PARTNERS  AND 
THIRD  Pi^RSONS:  Parries  in  actions 
by  and  against  partners;  effect  of  changes 
in  firm;  disqualification  of  one  partner  to 
sue;    action  in  firm  name,  etc. 


Chapter   IX. 

DISSOLUTION:  Causes  of  dissolution;  part- 
nerships for  a  definite  and  indefinite  time; 
causes  subject  to  stipulation;  causes  not  sub- 
ject to  stipulation;  causes  for  which  a  court 
will  decree  a  dissolution;  consequences  of 
dissolution  as  to  third  persons  and  as  to 
partners. 

Chapter   X. 

LIMITED  PARTNERSHIPS:  Covering  the 
subject  exhaustively,  including,  inter  alia, 
definition  and  establishment  of  relation; 
general  and  special  members;  certificate; 
contribution  of  general  and  si>ecial  partners; 
name;  sign;  rights  and  liabilities;  with- 
drawal, alteration,  and  interference;  insol- 
vency; termination  of  relation;  change  from 
limited  to  general  liability;    actions,  etc. 


Chapter    XI. 

lOINT-STOCK  COMPANIES:  Definition  and 
nature;  transfer  of  shares;  powers  of  mem- 
bers and  officers;  rights  and  liabilities;  ac- 
tions, etc. 


I  Volume,  6i6  pages.     $3.75,  net,  delivered. 


West  Publishing  Co.,  St.  Paul,  Minn. 

C1471  (20) 


(3n  t?e  Jgornfiooa  ^ttiti.) 


@  15anb6oo6  of 


&c\uit^  (phaUn^. 


Q?2  (§^^i'  3-  ^fipman,  ££.  (g., 

Author  of   "Shipman's  Common-Law  Pleading.** 


TABLE    OF    CONTENTS. 


Chapter  I. 

EQUITY  PLEADING  Ix\  GENERAL:  Cov- 
ering nature  and  scope  of  pleadings  in  eq- 
uity, 

Chapter  II. 

PARTIES:  Giving  general  rules,  and  covering 
classification  of  parties  as  necessary,  proper 
but  not  indispensable,  formal,  and  parties 
with  separable  interests;  parties  complain- 
ant and  respondent;  joinder,  etc. 

Chapter  III. 

PROCEEDINGS  IN  AN  EQUITABLE 
SUIT:  Indicating  the  steps  usually  taken 
and  the  method  of  procedure,  as  the  bill, 
appearance,  proceedings  on  default;  the 
modes  of  defense,  by  disclaimer,  demurrer, 
plea,  or  answer;  the  replication;  interlocu- I 
tory  proceedings,  as  amendment,  injunc- 
tions, production  of  documents,  interven- 
tion; the  evidence,  hearing,  and  decree:  the 
correction,  reversal,  or  enforccmout  of  de- 
crees, etc. 


Chapter  IV. 

BILLS  IN  EQUITY:  Covering  definition  and 
classification,  and  discussing  original  bills, 
and  bills  not  original,  with  a  summary  of 
the  general  rules  covering  the  bill,  etc. 

Chapter  V. 

TIIE  DISCLAIMER:  Definition,  nature,  and 
use. 

Chapter  VI. 

DEMURRER:  Definition;  form  of  demurrer, 
and  grounds  therefor;  orders  sustaining  or 
overruling  demurrer,  etc. 

Chapter  VII. 

THE  PLEA:  Definition,  nature,  and  office  of 
pleas,  grounds  for  pleas,  theu:  form,  support- 
ing answers,  etc. 

Chapter  VIII. 

TIIE  ANSWER:  Nature  and  office,  substance 
and  eli'ect,  of  the  answer,  and  the  character- 
istics thereof. 

Chapter  IX. 

TnE  REPLICATION. 


644  PAGES.     $3.75,  NET,  DELIVERED. 


WEST  PUBLISHING  CO.,  St.  Paul,  Minn. 

C1G30  (-1) 


[t^t  J^ornfiooii  ^cric6.) 


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Z(}C  San)  of  (Et>ibence. 

QSg  3o6n  3cig  (lU:(Ecft?e5,  ®..  dU.,  EE.  (g., 

Author  of  "Common-Law  Pleading,"  etc. 


TABLE    OF    CONTENTS. 


CHAPTER  I. 

INTRODUCTORY^: :    Definitions;    origin,   place 

and  function  of  the  law  of  evidence,  etc. 

CHAPTER   II. 
JUDICIAL  NOTICE:   The  doctrine  in  general; 
facts  which  may  or  must  be  noticed. 

CHAPTER   III. 

QUESTIONS  OF  LAW  AND  QUESTIONS 
OP  FACT:  Definitions;  province  of  court 
and  jury. 

CHAPTER  IV. 

BURDEN  OF  PROOF:  Burden  of  proof  never 
shifts;  burden  of  proceeding  may  shift;  ver- 
dict, etc. 

CHAPTER   V. 

PRESUMPTIONS:  Presumptions  as  rules  of 
law;  prima  facie,  conclusive,  spurious,  and 
conflicting  presumptions. 

CHAPTER   VI. 
ADMISSIONS:   Direct  and  indirect  admissions; 
admissibility;    civil  and  criminal   cases;    ef- 
fect of  admission,  etc. 

CHAPTER  VII. 
CONFESSIONS:    Defined;    voluntary  or  under 
influence;  may  be  explained;  evidence  there- 
from, etc. 

CHAPTER   VIII. 

MATTERS  EXCLUDED  AS  UNIMPOR- 
TANT, OR  AS  MISLEADING,  THOUGH 
LOGICALLY  RELEVANT:  Logical  and  le- 
gal relevancy,  rule  excluding;  classification 
of  matter;  proof  of  diverse  matters  consid- 
ered. 


CHAPTER  IX. 
CHARACTER:    General  rule; 
how  proved,  etc. 


when  material: 


CHAPTER  X. 

OPINION  EVIDENCE:  Matter  of  opinion  dis- 
tinguished from  matter  of  fact;  general  rule; 
exceptions;  matters  forming  subject  of  ex- 
pert opinion,  etc. 

CHAPTER   XI. 

HEARSAY:  General  rule;  exceptions;  real 
and  apparent;  classes  of  statements  admit- 
ted because  of  the  difficulty  of  other  proof. 

CHAPTER   XII. 

WITNESSES:  Rules  excluding  witnesses;  per- 
sons excluded;  privilege  distinguished  from 
disqualification;    privileged   persons. 

CHAPTER   XIII. 

EXAMINATION  OF  WITNESSES:  Ordinary 
method:  refreshing  memory;  direct  and 
cross  examination;  leading  questions;  im- 
peaching witness,  etc. 

CHAPTER   XIV. 

WRITINGS:  Best  evidence  rule;  production  of 
documents;  authentication  of  documents; 
proof  of  handwriting:  evidence  affecting  the 
contents  of  documents,  etc. 

CHAPTER   XV. 

DEMURRERS   TO    EVIDENCE:    Definition; 

when  joinder  compelled;   final  form,  etc. 


1  vol.    480  pages.     $3.75,  net,  delivered. 


WEST  PUBLISHING  CO.,  St.  Paul,  Minn. 

C1837  (22) 


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HE   Albany   Law  Journal,  in  a  recent  review  of  one  of  the  volumes  of  the 
Hornbook   Series,  writes  : 


"So  much  has  been  written  upon  the  merits  of  the  Hornbook  Series  that  anything  additional 
may  seem  superfluous;  yet  we  cannot  refrain  from  commenting,  in  passing,  upon  the  general  utility, 
merit,  and  scope  of  the  series.  *  *  *  The  series  is  of  untold  value  to  the  practicing  lawyer, 
enabling  him  to  find  and  refresh  his  mind  in  an  instant  upon  any  fundamental  principle  or  variation 
therefrom  of  which  he  may  be  in  doubt,  and  furnishing  an  ever-ready  and  convenient  digest  of  the 
law." 

This  emphasizes  the  fact,  which  has  also  been  practically  recognized  by  the 
members  of  the  bar  who  have  e.Kamined  the  volumes  issued  uu:ier  this  name,  that, 
although  low  in  price,  they  are  not,  in  consequence,  cheap  boolcs.  They  are  elemen- 
tary in  the  sense  that  they  deal  with  the  elementary  branches  of  law,  but  they  are 
not  by  any  means  elementary  in  the  sense  that  they  fail  to  give  the  compre- 
hensive handling  which  the  practitioner,  as  distinguished  from  the  law  student,  re- 
quires. In  planning  the  style  and  character  of  this  series,  the  controlling  idea 
was  that  any  principle  of  law  could  be  stated  in  simple  and  intelligible  terms,  if  the 
man  who  made  the  statement  understood  the  principle,  and  knew  how  to  express 
himself.  It  was  to  some  extent  an  attack  upon  the  old  theory  that  a  certain  amount 
of  obscurity  in  a  legal  document  heightened  the  effect  of  learning.  It  was  main- 
tained, instead,  that  any  legal  principle  could  be  stated  in  simple  and  intelligible 
terms,  and  each  separate  branch  of  the  law,  if  carefully  studied  with  this  in  view, 
could  be  mapped  out  so  that  the  fundamental  principles  involved  could  be  shown  in 
an  orderly  sequence,  and  in  their  relation  to  each  other.  The  soundness  of  the 
theory  has  been  shown  by  the  success  of  the  Hornbook  Series.  The  several  vol- 
umes have  been  prepared  by  different  authors,  carefully  chosen  from  the  field 
of  legal  writers,  with  the  object  of  securing  thorough  and  expert  treatment  of  the 
particular  subject  assigned  in  each  instance.  The  method  of  presentation  was  at  first 
considered  a  novel  one,  but  has  now  become  so  well  known,  through  the  seventeen 
works  issued,  that  the  Albany  Law  Journal  could  refer  to  it  in  the  terms  quoted  at 
the  beginning  of  this  notice.  The  books  have  been  found  so  exact  in  statement,  so 
convenient  in  arrangement,  and  so  unmistakably  clear  in  style,  that  they  have  been 
adopted  as  the  basis  of  instruction  in  over  seventy  law  schools.  At  the  same  time, 
they  have  been  found  by  practitioners  to  be  exactly  the  kind  of  book  that  a  prac- 
titioner needs  to  have  on  his  desk  for  current  reference.  He  presumably  knows 
the  law,  yet  he  often  desires  to  refresh  his  memory  regarding  some  special  branch 
before  he  takes  up  a  case  involving  questions  relating  to  it,  and  for  that  purpose 
the  arrangement  of  black-letter  paragraphs  for  the  statement  of  principles  is  pecul- 
iarly convenient.  At  the  same  time,  the  exceptions  and  modifications  of  these 
principles  are  stated  in  a  different  type,  so  that  it  is  possible  for  him  to  go  into  de- 
tails of  any  question  when  he  desires  to  do  so.  The  authorities  are  grouped  in 
notes  at  the  foot  of  the  page,  and  their  completeness  is  evidenced  by  such  testi- 
mony as  the  following: 

"I  found  upon  page  58  of  this  small  volume  ("Clark's  Criminal  Law],  in  a  small  compass,  a 
statement  of  the  divergent  views,  and  a  collation  of  the  authorities  pro  and  con  [on  a  certain  ques- 
tioa],  all  contained  in  a  more  condensed  and  satisfactory  form  than  I  have  found  in  any  other 
traatise." — Hon.  J.  M.  Dickinson,  Asst.  U.  S.  Atty.  Gen. 

"I  found  in  Clark's  Criminal  Procedure,  under  '  Jurisdiction,' authorit'es  regarding  the  ques- 
tion of  asportation,  for  which  I  had  on  a  previous  occasion  spent  months  of  patient  search.  Fetter 
on  Equity  has  also  already  paid  for  itself  many  times  over." — U.  S.  G.  Pitzer,  Prosecuting  Attorney, 
Martinsburg,  W.  Va. 

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